**UNITEDSTATES****SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.20549**

 

**Form 10-Q**

 

| x | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT of 1934** |
|---|--------------------------------------------------------------------------------------------------------|

 

**Forthe quarterly period ended March 31, 2008**

 

| **o** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT of 1934** |
|-------|---------------------------------------------------------------------------------------------------------|

 

**Commission File Number 000-30833**

 

**BRUKER CORPORATION**

(Exact name of registrant as specified inits charter)

 

| **Delaware**                                                    | ** ** | **04-3110160**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |       | (I.R.S. Employer  Identification No.) |

 

**40 Manning Road, Billerica, MA 01821**(Address of principal executive offices) (Zip Code)**

Registrant’s telephone number, including areacode: **(978) 663-3660**

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes x     No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer or a smaller reporting company. Seethe definitions of “accelerated filer, large accelerated filer, smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large  accelerated filer o                |   | Accelerated  filer x         |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated  filer o                  |   | Smaller  reporting company o |
| (Do not check if  a smaller reporting company) |   |                              |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  Yes o     No x

 

As ofMay 5, 2008, there were 163,356,556 shares of the Registrant’s commonstock outstanding.

 

 

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**BRUKERCORPORATION**

** **

**QuarterlyReport on Form 10-Q**

**Forthe Quarter Ended March 31, 2008**

 

**Index**

 
| ** **       | ** **                                                                                             | **Page** |
|------------------|--------------------------------------------------------------------------------------------------------|----------|
| **Part I**  | **FINANCIAL  INFORMATION**                                                                             | 3        |
| Item  1:         | Financial  Statements                                                                                  | 3        |
|             | Unaudited Condensed  Consolidated Balance Sheets as of March 31, 2008 and December 31,  2007 | 3        |
|             | Unaudited Condensed  Statements of Operations for the three months ended March 31, 2008 and  2007 | 4        |
|             | Unaudited Condensed  Statements of Cash Flows for the three months ended March 31, 2008 and  2007 | 5        |
|             | Notes  to Unaudited Condensed Consolidated Financial Statements                                        | 6        |
| Item 2:          | Management’s Discussion and Analysis of  Financial Condition and Results of Operations            | 17       |
| Item 3:          | Quantitative and Qualitative Disclosures  About Market Risk                                            | 27       |
| Item 4:          | Controls and Procedures                                                                                | 28       |
| **Part II** | **OTHER INFORMATION**                                                                                  | 30       |
| Item 1:          | Legal Proceedings                                                                                      | 30       |
| Item 1A:         | Risk Factors                                                                                           | 30       |
| Item 2:          | Unregistered Sales of Equity Securities  and Use of Proceeds                                           | 30       |
| Item 3:          | Defaults Upon Senior Securities                                                                        | 30       |
| Item 4:          | Submission of Matters to a Vote of  Security Holders                                                   | 30       |
| Item 5:          | Other Information                                                                                      | 32       |
| Item 6:          | Exhibits                                                                                               | 32       |
|             | Signatures                                                                                             | 33       |

 

 

2

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| **PART I** | **FINANCIAL  INFORMATION** |
|-----------------|----------------------------|

 
| **ITEM  1.** | **FINANCIAL STATEMENTS** |
|--------------|--------------------------|

 

**BRUKER CORPORATIONUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share data)**

** **
| ** **                                                                                                                                                                                                 | ** ** | **March 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                                 | ** ** | ** **               | ** ** | ** **                  | ** ** |
| **ASSETS**                                                                                                                                                                                                 | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Current assets:                                                                                                                                                                                            |       |                     |       |                        |       |
| Cash and cash  equivalents                                                                                                                                                                                 |       | $                        | 298,263    |                        | $          | 332,368 |   |
| Short-term  investments                                                                                                                                                                                    |       | 23,019                   |       | 12,186                      |       |
| Accounts  receivable, net                                                                                                                                                                                  |       | 165,081                  |       | 185,217                     |       |
| Inventories                                                                                                                                                                                                |       | 511,597                  |       | 447,688                     |       |
| Other current  assets                                                                                                                                                                                      |       | 88,500                   |       | 57,238                      |       |
| Total current  assets                                                                                                                                                                                      |       | 1,086,460                |       | 1,034,697                   |       |
| Property, plant  and equipment, net                                                                                                                                                                        |       | 231,541                  |       | 207,588                     |       |
| Intangibles and  other assets                                                                                                                                                                              |       | 79,428                   |       | 69,346                      |       |
| Total assets                                                                                                                                                                                               |       | $                        | 1,397,429  |                        | $          | 1,311,631 |   |
| ** **                                                                                                                                                                                                 | ** ** | ** **               | ** ** | ** **                  | ** ** |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Current  liabilities:                                                                                                                                                                                      |       |                     |       |                        |       |
| Short-term  borrowings                                                                                                                                                                                     |       | $                        | 253,096    |                        | $          | 35,591 |   |
| Accounts payable                                                                                                                                                                                           |       | 59,210                   |       | 52,293                      |       |
| Customer  advances                                                                                                                                                                                         |       | 275,241                  |       | 233,466                     |       |
| Other current  liabilities                                                                                                                                                                                 |       | 244,064                  |       | 239,841                     |       |
| Total current  liabilities                                                                                                                                                                                 |       | 831,611                  |       | 561,191                     |       |
|                                                                                                                                                                                                       |       |                     |       |                        |       |
| Long-term debt                                                                                                                                                                                             |       | 169,428                  |       | 8,605                       |       |
| Other long-term  liabilities                                                                                                                                                                               |       | 106,005                  |       | 105,445                     |       |
| Minority interest  in consolidated subsidiaries                                                                                                                                                            |       | 672                      |       | 538                         |       |
| Commitments and  contingencies (Note 16)                                                                                                                                                                   |       |                     |       |                        |       |
|                                                                                                                                                                                                       |       |                     |       |                        |       |
| Shareholders’  Equity:                                                                                                                                                                                |       |                     |       |                        |       |
| Preferred stock,  $0.01 par value, 5,000,000 shares authorized, none issued or outstanding at  March 31, 2008 or December 31, 2007                                                               |       | —                   |       | —                      |       |
| Common stock,  $0.01 par value, 260,000,000 and 200,000,000 shares authorized, 163,356,556  and 163,251,890 shares issued and outstanding at March 31, 2008 and  December 31, 2007, respectively |       | 1,626                    |       | 1,624                       |       |
| Treasury stock,  at cost, 8,469 shares and 0 shares at March 31, 2008 and  December 31, 2007, respectively                                                                                       |       | (98                      | )          | —                      |       |
| Other shareholders’  equity                                                                                                                                                                           |       | 288,185                  |       | 634,228                     |       |
| Total  shareholders’ equity                                                                                                                                                                           |       | 289,713                  |       | 635,852                     |       |
| Total  liabilities and shareholders’ equity                                                                                                                                                           |       | $                        | 1,397,429  |                        | $          | 1,311,631 |   |

 

The accompanying notes are an integral part of these statements.

 

 

3

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**BRUKER CORPORATIONUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)**

 
| ** **                                                                             | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                             | ** ** | **2008**                               | ** ** | **2007** | ** ** |
| Product revenue                                                                        |       | $                                      | 207,035    |   | $ | 181,609 |   |
| Service revenue                                                                        |       | 29,957                                 |       | 25,187 |   |
| Other revenue                                                                          |       | 1,444                                  |       | 740 |   |
| Total revenue                                                                          |       | 238,436                                |       | 207,536 |   |
|                                                                                   |       |                                   |       |   |   |
| Cost of product revenue                                                                |       | 104,901                                |       | 96,649 |   |
| Cost of service revenue                                                                |       | 20,406                                 |       | 16,339 |   |
| Total cost of  revenue                                                                 |       | 125,307                                |       | 112,988 |   |
| Gross profit                                                                           |       | 113,129                                |       | 94,548 |   |
|                                                                                   |       |                                   |       |   |   |
| Operating expenses:                                                                    |       |                                   |       |   |   |
| Sales and marketing                                                                    |       | 43,393                                 |       | 35,462 |   |
| General and administrative                                                             |       | 16,804                                 |       | 13,413 |   |
| Research and development                                                               |       | 31,205                                 |       | 25,964 |   |
| Acquisition related charges                                                            |       | 5,793                                  |       | — |   |
| Total operating  expenses                                                              |       | 97,195                                 |       | 74,839 |   |
| Operating income                                                                       |       | 15,934                                 |       | 19,709 |   |
|                                                                                   |       |                                   |       |   |   |
| Interest and other income (expense), net                                               |       | (12,189                                | )          | 750 |   |
| Income before income tax provision and minority interest  in consolidated subsidiaries |       | 3,745                                  |       | 20,459 |   |
| Income tax provision                                                                   |       | 4,270                                  |       | 6,023 |   |
| Income (loss) before minority interest in  consolidated subsidiaries                   |       | (525                                   | )          | 14,436 |   |
| Minority interest in consolidated subsidiaries                                         |       | 160                                    |       | 86 |   |
| Net income (loss)                                                                      |       | $                                      | (685       | ) | $ | 14,350 |   |
| Net income (loss) per common share - basic and diluted                                 |       | $                                      | (0.00      | ) | $ | 0.09 |   |
| Weighted average common shares outstanding:                                            |       |                                   |       |   |   |
| Basic                                                                                  |       | 162,303                                |       | 160,365 |   |
| Diluted                                                                                |       | 162,303                                |       | 162,906 |   |

 

The accompanying notes are an integral part of these statements.

 

 

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**BRUKER CORPORATIONUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)**

 
| ** **                                                | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                | ** ** | **2008**                               | ** ** | **2007** | ** ** |
| **Operating activities:**                                 | ** ** | ** **                             | ** ** | ** ** | ** ** |
| Net cash provided by operating activities                 |       | $                                      | 22,333     |   | $ | 21,523 |   |
|                                                      |       |                                   |       |   |   |
| **Investing activities:**                                 | ** ** | ** **                             | ** ** | ** ** | ** ** |
| Purchases of  property and equipment                      |       | (13,402                                | )          | (4,257 | ) |
| Acquisitions,  net of cash acquired                       |       | (416,828                               | )          | (1,916 | ) |
| Purchase of  short-term investments                       |       | (366                                   | )          | (116 | ) |
| Redemption of  short-term investments                     |       | 742                                    |       | — |   |
| Changes in  restricted cash                               |       | (10,734                                | )          | (806 | ) |
| Net cash used in investing activities                     |       | (440,588                               | )          | (7,095 | ) |
|                                                      |       |                                   |       |   |   |
| **Financing activities:**                                 | ** ** | ** **                             | ** ** | ** ** | ** ** |
| Proceeds from  (repayments of) short-term borrowings, net |       | 5,554                                  |       | (9,999 | ) |
| Proceeds from  (repayments of) long-term debt, net        |       | 353,297                                |       | (2,394 | ) |
| Payments of  deferred financing costs                     |       | (2,916                                 | )          | — |   |
| Proceeds from  issuance of common stock                   |       | —                                 |       | 17,962 |   |
| Repurchase of  common stock                               |       | —                                 |       | (6 | ) |
| Net cash provided by financing activities                 |       | 355,935                                |       | 5,563 |   |
| Effect of exchange rate changes on cash                   |       | 28,215                                 |       | 2,633 |   |
| Net change in cash and cash equivalents                   |       | (34,105                                | )          | 22,624 |   |
| Cash and cash equivalents at beginning of period          |       | 332,368                                |       | 311,240 |   |
| Cash and cash equivalents at end of period                |       | $                                      | 298,263    |   | $ | 333,864 |   |

 

The accompanying notes are an integral part of these statements.

 

 

5

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**BRUKER CORPORATIONNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**Note 1—Description of Business**

 

Bruker Corporation andits wholly-owned subsidiaries (the “Company”) design, manufacture, service andmarket proprietary life science and materials research systems based on itscore technology platforms, including X-ray technologies, magnetic resonancetechnologies, mass spectrometry technologies, and optical emission spectroscopyand infrared and Raman molecular spectroscopy technology. The Company alsosells a broad range of field analytical systems for chemical, biological,radiological and nuclear (CBRN) detection. The Company maintains majortechnical and manufacturing centers in Europe, North America and Japan andsales offices throughout the world. The Company’s diverse customer baseincludes pharmaceutical, biotechnology and proteomics companies, academicinstitutions, advanced materials and semiconductor industries and governmentagencies.

 

The financial statementsrepresent the consolidated accounts of the Company and its wholly-ownedsubsidiaries. All significant intercompany accounts and transactions have beeneliminated in consolidation. The condensed consolidated financial statements asof and for the three months ended March 31, 2008 and 2007 have beenprepared in accordance with accounting principles generally accepted in theUnited States of America for interim financial information and with Article 10of Regulation S-X. Accordingly, the financial information presented herein doesnot include all of the information and footnotes required by accountingprinciples generally accepted in the United States of America for completefinancial statements. In the opinion of management, all adjustments, consistingonly of normal recurring adjustments, considered necessary for a fairpresentation have been included. The results for interim periods are notnecessarily indicative of the results expected for the full year.

 

On February 26,2008, the Company completed the acquisition of all of the Bruker BioSpin Group(“Bruker BioSpin”). Both the Company and Bruker BioSpin were majority owned bysix affiliated stockholders prior to the acquisition. As a result, theacquisition of Bruker BioSpin by the Company is considered a businesscombination of companies under common control and was accounted for athistorical carrying values at the date of the acquisition. The consolidatedbalance sheets, statements of operations, statements of cash flows and notes tothe consolidated financial statements for all periods presented herein havebeen restated by combining the historical consolidated financial statements ofthe Company with those of Bruker BioSpin.

 

Following the acquisitionof Bruker BioSpin, management reevaluated the way the Company is managed andthe internal reporting structure, and as a result of that evaluation, willreport its financial results on the basis of the following two reportablesegments:

 

·                                          *BioScience*. The operations of this segment includethe design, manufacture and distribution of advanced instrumentation andautomated solutions based on X-ray technology and optical emissionspectroscopy, mass spectrometry technology and infrared and Raman molecularspectroscopy technology. Typical customers of the BioScience segment include pharmaceutical,biotechnology, proteomics and molecular diagnostic companies, academicinstitutions, government agencies, semiconductor companies, chemical, cement,metals and petroleum companies, raw material manufacturers and food, beverageand agricultural companies.

 

·                                          *BioSpin*. The operations of this segment includethe design, as manufacture and distribution of enabling life science toolsbased on its core technology, magnetic resonance, as well as the manufacturingand development of low temperature superconductor (LTS) and high temperaturesuperconductor (HTS) wires for use in advanced magnet technology and energyapplications. Typical customers of the BioSpin segment include pharmaceuticaland biotechnology companies, academic institutions and government agencies.

 

**2. Public Offering of Common Stock**

 

On February 12,2007, the Company and a group of selling stockholders completed a publicoffering of 11,960,000 shares of its common stock, of which 2,530,000 were soldby the Company and 9,430,000 were sold by four selling shareholders, at $7.10per share, generating net proceeds of approximately $16.9 

 

 

6

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million to the Companyand approximately $63.2 million to the selling stockholders, in the aggregate.

 

**3.  Acquisition of Bruker BioSpin**

 

On February 26,2008, the Company completed the acquisition of all of Bruker BioSpin inaccordance with the terms of various agreements dated as of December 2,2007. Both the Company and Bruker BioSpin were majority owned by six affiliatedstockholders prior to the acquisition. As a result, the acquisition of BrukerBioSpin by the Company is considered a business combination of companies undercommon control and was accounted for at historical carrying values at the dateof the acquisition. Historical consolidated balance sheets, statements ofoperations, statements of cash flows and notes to the consolidated financialstatements have been restated by combining the historical consolidatedfinancial statements of Bruker Corporation with those of Bruker BioSpin. Inaddition, because the transaction is accounted for as an acquisition ofbusinesses under common control, all one-time transaction costs have beenexpensed as incurred, rather than being added to goodwill. With the addition ofBruker BioSpin, the Company enhanced its position as a leading supplier forlife science and materials research, its distribution in the Americas, Europeand Asia, and its sales and service infrastructure.

 

Upon the completion ofthis acquisition, the Company paid an aggregate of $914.0 million ofconsideration to the shareholders of Bruker BioSpin, which was financed with57,544,872 shares of unregistered common stock valued at $526.0 million, $351.0million of cash obtained under a new credit facility, and the balance with cashon hand. The value of the shares of common stock in connection with the mergerwas determined using a trailing average of the closing market prices of theCompany’s stock for a period of ten consecutive trading days ending two daysprior to the signing of the various stock purchase agreements.

 

Under the stock purchaseagreements, $98.8 million of the purchase price was paid into escrow accountspending the resolution of indemnification obligations and working capital obligationsof the sellers. The unused portion of the $92.0 million indemnity escrow willbe released to the sellers at the later of (1) the 30th dayfollowing the receipt by the Company of combined audited financial statementsof Bruker BioSpin for the fiscal year ended December 31, 2008 or (2) theresolution of any claim for indemnification of which the sellers have receivednotice prior to the conclusion of the 30 day period described in (1) above.The unused portion of the $6.8 million working capital escrow will be releasedto the sellers within 25 business days following the receipt by the Company ofcombined audited financial statements of Bruker BioSpin for the fiscal yearended December 31, 2007.

 

**4.  Other Acquisitions**

 

On January 31, 2008,the Company acquired JUWE Laborgeraete GmbH (“JUWE”), a privately-held companylocated in Viersen, Germany. JUWE develops, manufactures and distributesadvanced combustion analysis systems for various carbon, hydrogen, nitrogen,oxygen and sulfur elemental applications. JUWE’s products are complementary tothe Company’s optical emission spectroscopy products. The results of JUWE havebeen included in the BioScience segment from the date of acquisition. Theaggregate purchase price of JUWE was $2.7 million, of which $1.2 million waspaid in cash, $1.1 million was funded by the issuance of an aggregate of111,000 restricted unregistered shares of the Company’s common stock, par value$0.01 per share, to JUWE’s shareholders and $0.4 million of net liabilities assumedby the Company. The Company recorded $2.2 million of goodwill in connectionwith the acquisition of JUWE and assigned the goodwill to the BioSciencesegment. Proforma financial information reflecting the acquisition of JUWE hasnot been presented because the impact on revenues, net income (loss) and net income(loss) per common share would not have been material.

 

7

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**5.  Provision for Income Taxes**

 

The income tax provisionfor the three months ended March 31, 2008 was $4.3 million compared to anincome tax provision of $6.0 million for the three months ended March 31,2007, representing effective tax rates of 114.0% and 29.4% respectively. Oureffective tax rate reflects our tax provision for non-U.S. entities only, sinceno benefit was recognized for cumulative losses incurred in the U.S. We willmaintain a full valuation allowance for our U.S. net operating losses untilevidence exists where it is more likely than not that the loss carryforwardamounts will be utilized to offset U.S. taxable income. Our tax rate may changeover time as the amount or mix of income and taxes outside the U.S. changes.Our effective tax rate is calculated using our projected annual pre-tax incomeor loss and is affected by research and development tax credits, the expectedlevel of other tax benefits, the impact of changes to the valuation allowance,and changes in the mix of our pre-tax income and losses among jurisdictionswith varying statutory tax rates and credits.

 

In July 2006, theFinancial Accounting Standards Board issued FASB Interpretation No. 48, *Accounting for Uncertainty in Income Taxes — an interpretation of FASBStatement 109* (“FIN No. 48”). Among other things, FIN 48provides guidance to address uncertainty in tax positions and clarifies theaccounting for income taxes by prescribing a minimum recognition thresholdwhich income tax positions must achieve before being recognized in thefinancial statements. In connection with the adoption of FIN No. 48, theCompany recorded a net reduction to retained earnings of $2.0 million as of January 1,2007. The Company has unrecognized tax benefits of approximately $18.9 millionas of March 31, 2008, of which $8.1 million, if recognized, would resultin a reduction of the Company’s effective tax rate.  One of the Company’s Swiss entities iscurrently being audited and the audit is expected to be completed during thesecond quarter of 2008. The audit covers tax years 2003-2006 and the Companycannot reasonably estimate the outcome of this audit. As of March 31,2008, the Company does not expect any material changes, except for the Swisstax audit mentioned previously, to unrecognized tax positions within the nexttwelve months.

 

The Company recognizespenalties and interest related to unrecognized tax benefits in the provisionfor income taxes. As of March 31, 2008, approximately $2.1 million ofaccrued interest and penalties related to uncertain tax positions was includedin other current liabilities on our consolidated balance sheet, of which $0.4million was recorded during the three months ended March 31, 2008.

 

The tax years 2003 to2007 are open tax years in our major taxing jurisdictions. The Company filesreturns in many foreign and state jurisdictions with varying statutes oflimitations.

 

**6. Stock-Based Compensation**

 

In 2000, the Board ofDirectors adopted and the shareholders approved the 2000 Stock Option Plan. The2000 Stock Option Plan allows a committee of the Board of Directors to grantincentive stock options, non-qualified stock options, stock appreciation rightsand stock awards (including restricted stock and phantom shares). The committeehas the authority to determine which employees will receive the awards, theamount of the awards and other terms and conditions of the awards. Awardsgranted by the committee 

 

 

8

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typically vestover a period of three to five years.

 

In2003, the Company’s shareholders approved an amendment and restatement of the2000 Stock Option Plan to change the plan name and increase the number ofshares available for issuance by 4,132,000 shares, from 2,188,000 shares to6,320,000 shares. The name of the amended plan is the Bruker BioSciencesCorporation Amended and Restated 2000 Stock Option Plan. In 2006, the Company’sshareholders approved an amendment and restatement of the Bruker BioSciencesCorporation Amended and Restated 2000 Stock Option Plan to increase the numberof shares available for issuance by 1,680,000 shares, from 6,320,000 shares to8,000,000 shares. In January 2008, the Company’s shareholders approvedanother amendment and restatement of the Bruker BioSciences Corporation Amendedand Restated 2000 Stock Option Plan to increase the number of shares availablefor issuance by 2,000,000 shares, from 8,000,000 shares to 10,000,000 shares.

 

As of March 31,2008, the Company’s primary types of share-based compensation were in the formof issuances of stock options and restricted stock. The Company recordedstock-based compensation expense for the three months ended March 31, 2008and 2007, as follows (in thousands):

 

| ** **                                 | ** ** | **Three Months Ended March 31,** | ** ** |
|--------------------------------------------|------------|---------------------------------------|------------|
| ** **                                 | ** ** | **2008**                              | ** ** | **2007** | ** ** |
| Stock options                              |       | $                                     | 528        |   | $ | 233 |   |
| Restricted stock                           |       | 143                                   |       | 161 |   |
| Total stock-based compensation, pre-tax    |       | 671                                   |       | 394 |   |
| Tax benefit                                |       | (188                                  | )          | (110 | ) |
| Total stock-based compensation, net of tax |       | $                                     | 483        |   | $ | 284 |   |

 

Restrictedshares of the Company’s common stock are periodically awarded to executiveofficers and certain key employees of the Company subject to a servicerestriction which expires ratably over a period of three to five years. Therestricted shares of common stock may not be sold or transferred during therestriction period. Stock compensation for restricted stock is recorded basedon the stock price on the grant date and charged to expense ratably through therestriction period. The following table summarizes information about restrictedstock activity during the three months ended March 31, 2008:

 

| ** **                            | ** ** | **Shares  Subject to  Restriction** | ** ** | **Weighted  Average  Grant Date  Fair Value** | ** ** |
|---------------------------------------|------------|-------------------------------------|------------|-----------------------------------------------|------------|
| Outstanding at December 31, 2007 |       | 569,402                             |       | $                                             | 5.74       |   |
| Granted                               |       | —                              |       | —                                        |       |
| Vested                                |       | (30,030                             | )          | 5.64                                          |       |
| Forfeited                             |       | (4,500                              | )          | 6.15                                          |       |
| Outstanding at March 31, 2008    |       | 534,872                             |       | $                                             | 5.74       |   |

 

Unrecognized pretaxexpense of $2.1 million related to restricted stock awards is expected to berecognized over the weighted average remaining service period of 3.1 years forawards outstanding at March 31, 2008.

 

Stock options of theCompany’s common stock are periodically awarded to executive officers and otheremployees of the Company subject to a vesting period which expires ratably overa period of three to five years. The fair value of each stock option award isestimated on the date of grant using the Black-Scholes option-pricing model.Assumptions regarding volatility, expected term, dividend yield and risk-freeinterest rate are required for the Black-Scholes model. Volatility and expectedterm assumptions are based on the Company’s historical experience. Therisk-free interest rate is based on a U.S. treasury note with a maturitysimilar to the stock option award’s expected life. The assumptions forvolatility, expected 

 

 

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life, dividend yield andrisk-free interest rate are presented in the table below:

 

| ** **              | ** ** | **Three Months Ended March 31,** | ** ** |
|-------------------------|------------|---------------------------------------|------------|
| ** **              | ** ** | **2008**                              | ** ** | **2007** | ** ** |
| Risk-free interest rate |       | 2.71% - 3.54%                         |       | 4.52% - 4.81% |   |
| Expected life           |       | 6.5 years                             |       | 6.5 years |   |
| Volatility              |       | 72.0%                                 |       | 82.0% |   |
| Expected dividend yield |       | 0%                                    |       | 0% |   |

 

All stock options grantedhad an exercise price equal to the market value of the underlying common stockon the date of grant. Stock option activity for the three months ended March31, 2008 was as follows:

 
| ** **                            | ** ** | **Shares  Subject to  Options** | ** ** | **Weighted  Average  Option  Price** | ** ** | **Weighted  Average  Remaining  Contractual**

**Term (Yrs)** | ** ** | **Aggregate  Intrinsic  Value**

**($’s in 000’s)** | ** ** |
|---------------------------------------|------------|---------------------------------|------------|--------------------------------------|------------|---------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| Outstanding at December 31, 2007 |       | 4,423,712                       |       | $                                    | 6.87       |                                                          |       |                                                          |       |   |
| Granted                               |       | 84,000                          |       | 11.95                                |       |                                                          |       |                                                          |       |
| Exercised                             |       | (1,000                          | )          | 7.95                                 |       |                                                          |       |                                                          |       |
| Forfeited                             |       | (33,750                         | )          | 9.27                                 |       |                                                          |       |                                                          |       |
| Outstanding at March 31, 2008    |       | 4,472,962                       |       | $                                    | 6.94       |                                                          | 4.4        |                                                          | $          | 38,142 |   |
| Exercisable at March 31, 2008    |       | 2,613,317                       |       | $                                    | 6.72       |                                                          | 4.1        |                                                          | $          | 23,011 |   |

 

The following tablesummarizes information about stock options outstanding and exercisable at March 31,2008:

 
| ** **                    | ** ** | **Options Outstanding** | ** ** | **Options Exercisable**                                   | ** ** |
|-------------------------------|------------|-------------------------|------------|-----------------------------------------------------------|------------|
| **Range of  Exercise Prices** | ** ** | **Number  Outstanding** | ** ** | **Weighted  Average  Remaining  Contractual  Term (Yrs)** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Aggregate  Intrinsic  Value  ($’s in 000’s)** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Aggregate  Intrinsic  Value  ($’s in 000’s)** | ** ** |
| $2.12 to $4.00                |       | 681,485                 |       | 3.5                                                       |       | $ | 3.20 |   | $ | 8,307 |   | 574,332 |   | $ | 3.17 |   | $ | 7,016 |   |
| $4.01 to $6.00                |       | 1,567,854               |       | 4.2                                                       |       | 5.18 |   | 16,014 |   | 1,088,277 |   | 5.13 |   | 11,159 |   |
| $6.01 to $10.00               |       | 1,567,769               |       | 6.8                                                       |       | 7.68 |   | 12,088 |   | 426,312 |   | 6.93 |   | 3,605 |   |
| $10.01 to $13.00              |       | 344,354                 |       | 4.7                                                       |       | 11.19 |   | 1,446 |   | 212,896 |   | 10.96 |   | 944 |   |
| $13.01 and above              |       | 311,500                 |       | 3.1                                                       |       | 15.64 |   | 287 |   | 311,500 |   | 15.64 |   | 287 |   |
|                          |       | 4,472,962               |       | 4.4                                                       |       | $ | 6.94 |   | $ | 38,142 |   | 2,613,317 |   | $ | 6.72 |   | $ | 23,011 |   |

 

The intrinsic valuesabove are based on the Company’s closing stock price of $15.39 on March 31,2008. The weighted-average grant-date fair value of options granted during thethree months ended March 31, 2008, was $11.95. Unrecognized pretax expenseof $8.6 million related to stock options is expected to be recognized over theweighted average remaining service period of 3.6 years for awards outstandingat March 31, 2008.

 

**7. Fair Value of FinancialInstruments**

 

In September 2006,the FASB issued SFAS No. 157, *Fair Value Measurements*(“SFAS No. 157”), which is effective for fiscal years beginning after November 15,2007. The Company adopted SFAS No. 157 as of January 1, 2008. Aspermitted by FASB Staff Position (“FSP”) No. SFAS 157-2, *Effective Date of FASB Statement No. 157* (“FSP No. SFAS157-2”), the Company elected to defer the adoption of SFAS No. 157 for allnon-financial assets and non-financial liabilities, except those that arerecognized or disclosed at fair value in the financial statements on arecurring basis until January 1, 2009. There was no cumulative effect ofadoption related to SFAS No. 157 and the adoption did not have an impacton the 

 

 

10

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Company’s financialposition, results of operations, or cash flows. The Company is studying SFAS No. 157with respect to non-financial assets and non-financial liabilities fallingunder the scope of FSP No. SFAS 157-2 and has not yet determined theexpected impact on the Company’s financial position, results of operations, orcash flows.

 

SFAS No. 157establishes a three-level valuation hierarchy for measuring fair value andexpands financial statement disclosures about fair value measurements. Thevaluation hierarchy is based upon the transparency of inputs to the valuationof an asset or liability as of the measurement date. The three levels aredefined as follows:

 

·                                          *Level 1*: Inputs to the valuation methodology arequoted prices (unadjusted) for identical assets or liabilities in activemarkets.

 

·                                          *Level 2*: Inputs to the valuation methodologyinclude quoted prices for similar assets and liabilities in active markets, andinputs that are observable for the asset or liability, either directly orindirectly, for substantially the full term of the financial instrument.

 

·                                          *Level 3*: Inputs to the valuation methodology are unobservable and significant tothe fair value measurement.

 

A financial instrument’scategorization within the valuation hierarchy is based upon the lowest level ofinput that is significant to the fair value measurement. The Company measuresthe following financial assets at fair value on a recurring basis. The fairvalue of these financial assets was determined using the following inputs at March 31,2008:

 

 
| ** **                           | ** ** | **Total** | ** ** | **Quoted Prices in  Active Markets for  Identical Assets  (Level 1)** | ** ** | **Significant Other  Observable Inputs  (Level 2)** | ** ** | **Significant  Unobservable Inputs  (Level 3)** | ** ** |
|--------------------------------------|------------|-----------|------------|-----------------------------------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------|------------|
| Cash and cash equivalents            |       | $         | 298,263    |                                                                  | $          | 298,263                                             |       | $                                               | —     |   | $ | — |   |
| Short-term investments (1)           |       | 23,019    |       | 23,019                                                                |       | —                                              |       | —                                          |       |
| Total assets  recorded at fair value |       | $         | 321,282    |                                                                  | $          | 321,282                                             |       | $                                               | —     |   | $ | — |   |

----

(1)       Short-term investments consist primarily of moneymarket funds for which the Company determines fair value through quoted marketprices.

 

In February 2007,the FASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities Including an amendment of FASBStatement No. 115* (“SFAS No. 159”). SFAS No. 159permits entities to choose to measure many financial instruments and certainother items at fair value and is effective for fiscal years beginning after November 15,2007. The Company has elected not to apply the fair value option to any of itsassets and liabilities.

 

**8. Inventories**

 

Inventories consisted ofthe following as of March 31, 2008 and December 31, 2007 (inthousands):

 

| ** **          | ** ** | **March 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|---------------------|------------|--------------------------|------------|-----------------------------|------------|
| Raw materials       |       | $                        | 131,629    |                        | $          | 116,883 |   |
| Work-in process     |       | 165,065                  |       | 137,959                     |       |
| Demonstration units |       | 39,338                   |       | 37,195                      |       |
| Finished goods      |       | 175,565                  |       | 155,651                     |       |
| Total inventories   |       | $                        | 511,597    |                        | $          | 447,688 |   |

 

 

11

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**9. Goodwill and Other Intangible Assets**

 

The following is asummary of other intangible assets subject to amortization as of March 31,2008 and December 31, 2007 (in thousands):

 
| ** **                               | ** ** | ** **   | ** ** | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|------------------------------------------|------------|--------------|------------|-------------------------|------------|----------------------------|------------|
| ** **                               | ** ** | **Useful**   | ** ** | **Gross**               | ** ** | ** **                 | ** ** | **Net** | ** ** | **Gross** | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **                               | ** ** | **Lives**    | ** ** | **Carrying**            | ** ** | **Accumulated**            | ** ** | **Carrying** | ** ** | **Carrying** | ** ** | **Accumulated** | ** ** | **Carrying** | ** ** |
| ** **                               | ** ** | **in Years** | ** ** | **Amount**              | ** ** | **Amortization**           | ** ** | **Amount** | ** ** | **Amount** | ** ** | **Amortization** | ** ** | **Amount** | ** ** |
| Existing  technology and related patents |       | 3 to 10      |       | $                       | 14,614     |                       | $          | (8,919 | ) | $ | 5,695 |   | $ | 13,292 |   | $ | (7,937 | ) | $ | 5,355 |   |
| Customer  relationships                  |       | 5            |       | 1,115                   |       | (525                       | )          | 590 |   | 1,115 |   | (477 | ) | 638 |   |
| Trade names                              |       | 5 to 10      |       | 439                     |       | (191                       | )          | 248 |   | 439 |   | (176 | ) | 263 |   |
| Total  amortizable intangible assets     |       |         |       | $                       | 16,168     |                       | $          | (9,635 | ) | $ | 6,533 |   | $ | 14,846 |   | $ | (8,590 | ) | $ | 6,256 |   |

 

For the three monthsended March 31, 2008 and 2007, the Company recorded amortization expenseof $1.0 million and $0.7 million, respectively, related to other amortizableintangible assets.

 

The estimated futureamortization expense related to other amortizable intangible assets is asfollows (in thousands):

 

| **For the year ending December 31,** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|------------|------------|
| 2008 (a)                                  |       | $          | 1,367      |   |
| 2009                                      |       | 1,580      |       |
| 2010                                      |       | 1,478      |       |
| 2011                                      |       | 915        |       |
| 2012                                      |       | 382        |       |
| Thereafter                                |       | 811        |       |
| Total                                     |       | $          | 6,533      |   |

----

(a)                      Amount represents estimated amortizationexpense for the remaining nine months ended December 31, 2008.

 

The carrying amount ofgoodwill was $43.0 million and $40.8 million as of March 31, 2008 and December 31,2007, respectively, and is included in the BioScience segment. The Companyperforms its annual test for indications of impairment as of December 31st eachyear. The Company completed its annual test for impairment as of December 31,2007 and determined that goodwill was not impaired at that time.

 

**10. Warranty Costs**

 

TheCompany typically provides a one to two-year parts and labor warranty with thepurchase of equipment. The anticipated cost for this warranty is accrued uponrecognition of the sale and is included as a current liability on the balancesheet. The Company also offers to its customers warranty and service agreementsextending beyond the initial year of warranty for a fee. These fees arerecorded as deferred revenue and amortized into income over the life of theextended warranty contract.

 

Changes in the Company’saccrued warranty liability during the three months ended March 31, 2008were as follows (in thousands):

 

| Warranty accrual at December 31, 2007       |   | $      | 27,181 |   |
|--------------------------------------------------|--------|--------|--------|--------|
| Accruals for warranties issued during the period |   | 6,235  |   |
| Settlements of warranty claims                   |   | (7,377 | )      |
| Foreign currency impact                          |   | 1,776  |   |
| Warranty accrual at March 31, 2008          |   | $      | 27,815 |   |

 

**11. Debt**

 

In connection with theacquisition of Bruker BioSpin, the Company entered into a credit agreement witha syndication of lenders, which we refer to as the Credit Agreement, thatprovides for a revolving 

 

 

12

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credit line with amaximum commitment of $230.0 million and a term facility of $150.0 million. Theoutstanding principal under the term loan is payable in quarterly installmentsthrough December 2012. Borrowings under the Credit Agreement bearinterest, at the Company’s option, at either (i) the higher of the primerate or the federal funds rate plus 0.50%, or (ii) adjusted LIBOR, plusmargins ranging from 0.40% to 1.25% and a facility fee ranging from 0.10% to0.20%. As of March 31, 2008, the weighted average interest rate ofborrowings under the Credit Agreement was approximately 4.1%.

 

Borrowings under theCredit Agreement are secured by the pledge to the banks of 100% of the capitalstock of each of the Company’s wholly-owned domestic subsidiaries and 65% ofthe capital stock of certain of the Company’s direct or indirect wholly-ownedforeign subsidiaries. The Credit Agreement also requires the Company tomaintain certain financial ratios related to leverage ratios and interestcoverage ratios as defined in the Credit Agreement. In addition to the financialratios, the Credit Agreement restricts, among other things, the Company’sability to do the following: make certain payments; incur additional debt;incur certain liens; make certain investments, including derivative agreements;merge, consolidate, sell or transfer all or substantially all of the Company’sassets; and enter into certain transactions with affiliates.

 

At March 31, 2008,the Company had outstanding debt totaling $422.5 million consisting of $369.0million outstanding under the Credit Agreement, $26.7 million outstanding underother long-term debt arrangements, $23.8 million outstanding under revolvinglines of credit and $3.0 million under capital lease obligations. At December 31,2007, we had outstanding debt totaling $44.2 million consisting of $28.0million outstanding under other long-term debt arrangements, $13.2 millionoutstanding under other revolving lines of credit and $3.0 million undercapital lease obligations.

 

Amounts outstanding underother long-term debt arrangements include both collateralized anduncollateralized arrangements with various financial institutions in France,Germany, Japan and a government agency in the United States. The Company’slong-term debt arrangements also consist of fixed and variable interest ratesranging from 1.8% to 8.0% at March 31, 2008 and December 31, 2007. Inconnection with certain of these agreements the Company is required to maintaincertain financial ratios as defined in the agreements. At March 31, 2008, theCompany was not in compliance with one of the covenants required by ourarrangement with a government agency in the United States. The failure to meetthis covenant did not trigger any cross-default provisions in other borrowingarrangements, including the Credit Agreement. On May 8, 2008, the Companyreceived a limited waiver from the holder of this debt for the quarterly periodended March 31, 2008.

 

The Company’s revolvinglines of credit are with various financial institutions in Germany, Japan andFrance and have aggregate maximum borrowing amounts of approximately $84.6million and $145.5 million at March 31, 2008 and December 31, 2007,respectively. Effective February 26, 2008, the Company terminated a $75.0million line of credit in the United States and replaced it with the revolvingcredit available under the Credit Agreement. With consideration to outstandingletters of credit, the Company had availability of approximately $50.1 millionand $119.0 million under other revolving lines of credit at March 31, 2008and December 31, 2007, respectively. The Company’s revolving lines ofcredit are generally uncollateralized and bear interest at variable ratesranging from 1.5% to 9.8% at March 31, 2008 and December 31, 2007.

 

**12. Employee Benefit Plans**

 

The Company has definedbenefit retirement plans that cover substantially all employees of a Biosciencesubsidiary in Germany who were employed as of September 30, 1997, as wellas all employees of the BioSpin subsidiaries located in Switzerland, France,and Japan and certain employees of a BioSpin subsidiary in Germany. The plansprovide pension benefits based upon final average salary and years of service.

 

The net periodic pensionbenefit cost includes the following components during the three months ended March 31,2008 and 2007 (in thousands):

 

 

13

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| ** **                                  | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|---------------------------------------------|------------|------------|------------|------------|------------|
| **Components of net periodic benefit cost** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Service cost                                |       | $          | 936        |       | $          | 829 |   |
| Interest cost                               |       | 953        |       | 748        |       |
| Expected return on plan assets              |       | (1,000     | )          | (712       | )          |
| Amortization and actuarial gains and losses |       | (2         | )          | —     |       |
| Net periodic benefit cost                   |       | $          | 887        |       | $          | 865 |   |

 

The Company madecontributions of $0.6 million to its defined benefit plans during the threemonths ended March 31, 2008 and estimates contributions of $1.6 million duringthe remainder of 2008.

 

**13. Earnings Per Share**

 

Basic earnings per shareis calculated by dividing net earnings by the weighted-average number of commonshares outstanding during the period. Restricted stock is not included in the calculation of basic EPS until thetime-based restriction has lapsed. Except where the result would beanti-dilutive, the diluted earnings per share computation includes the effectof potential shares, shares which would be issuable upon the exercise ofoutstanding stock options or outstanding restricted stock issuable when therestrictions lapse, reduced by the number of shares which are assumed to bepurchased by the Company from the resulting proceeds at the average marketprice during the period.

 

The following table setsforth the computation of basic and diluted average shares outstanding for thethree months ended March 31, 2008 and 2007 (in thousands):

 

| ** **                                      | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|-------------------------------------------------|------------|------------|------------|------------|------------|
| Net income (loss), as reported                  |       | $          | (685       | )          | $          | 14,350 |   |
|                                            |       |       |       |       |       |
| **Weighted average shares outstanding:**        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Weighted average  shares outstanding - basic    |       | 162,303    |       | 160,365    |       |
| Effect of  dilutive securities:                 |       |       |       |       |       |
| Stock options  and restricted stock             |       | —     |       | 2,541      |       |
| Weighted average  shares outstanding - diluted  |       | 162,303    |       | 162,906    |       |
| Net income (loss) per share - basic and diluted |       | $          | (0.00      | )          | $          | 0.09 |   |

 

As a result of the netloss for the three months ended March 31, 2008, all outstanding stockoptions and unvested shares of restricted stock, totaling 5,007,834 shares,were excluded from the computation of diluted earnings per share because theireffect was anti-dilutive. Stock options to purchase 546,000 shares wereexcluded from the computation of diluted earnings per share in the three monthsended March 31, 2007, because the exercise price of the stock optionsexceeded the average market price of the Company’s common stock and, as aresult, would have had an anti-dilutive effect.

 

**14.Interest and Other Income (Expense), Net**

 

The components ofinterest and other income (expense), net, were as follows for the three monthsended March 31, 2008 and 2007 (in thousands):

 

 

14

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| ** **                                       | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|
| Interest income                                  |       | $        | 2,492      |     | $          | 1,868 |   |
| Interest expense                                 |       | (2,694   | )          | (620     | )          |
| Exchange losses on foreign currency transactions |       | (12,219  | )          | (711     | )          |
| Other                                            |       | 232      |       | 213      |       |
| Interest and other income (expense), net         |       | $        | (12,189    | )        | $          | 750 |   |

 

**15. Comprehensive Income**

 

Comprehensiveincome refers to revenues, expenses, gains and losses that under accountingprinciples generally accepted in the United States of America are included inother comprehensive income, but excluded from net income as these amounts arerecorded directly as an adjustment to shareholders’ equity, net of tax. The following is a summary of comprehensive income for the three months ended March 31,2008 and 2007 (in thousands):

 

| ** **                                         | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|
| Net income (loss)                                  |       | $        | (685       | )        | $          | 14,350 |   |
| Foreign currency translation adjustments           |       | 39,112   |       | 5,066    |       |
| Unrealized gains on available for sales securities |       | 759      |       | 645      |       |
| Pension liability adjustments                      |       | (508     | )          | (48      | )          |
| Total comprehensive income                         |       | $        | 38,678     |     | $          | 20,013 |   |

 

**16. Commitments and Contingencies**

 

Lawsuits,claims and proceedings of a nature considered normal to its businesses may bepending from time to time against the Company. The Company believes the outcomeof these proceedings, if any, will not have a material impact on the Company’sfinancial position or results of operations.

 

**17. Letters of Credit and Guarantees**

 

As of March 31,2008 and December 31, 2007, the Company had letters of credit and bankguarantees of $62.8 million and $67.7 million, respectively, for itscustomer advances. Certain of these letters of credit and bank guaranteesaffect the availability of the Company’s lines of credit.

 

**18. Business Segment Information**

 

SFAS No. 131,*Disclosures about Segments of an Enterprise andRelated Information*, establishes standards for reporting informationabout operating segments in annual financial statements of public businessenterprises. It also establishes standards for related disclosures aboutproducts and service, geographic areas and major customers. The Companyevaluated its business activities that are regularly reviewed by the ChiefExecutive Officer and for which discrete financial information is available. Asa result of this evaluation, the Company determined that there are tworeportable segments:

 

·                                          *BioScience*. This reportable segment consists ofthree operating segments that have been combined into one reportable segmentnamely Bruker AXS, Bruker Daltonics and Bruker Optics. The operations of thissegment include the design, manufacture and distribution of advancedinstrumentation and automated solutions based on X-ray technology and opticalemission spectroscopy, mass spectrometry technology and infrared and Ramanmolecular spectroscopy technology. Typical customers of the BioScience segmentinclude pharmaceutical, biotechnology, proteomics and molecular diagnosticcompanies, academic institutions, government agencies, semiconductor companies,chemical, cement, metals and petroleum companies, raw material manufacturersand food, beverage and agricultural companies.

 

 

15

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·                                          *BioSpin*. The operations of this segment includethe design, manufacture and distribution of enabling life science tools basedon its core technology, magnetic resonance, as well as the manufacturing anddevelopment of low temperature superconductor (LTS) and high temperaturesuperconductor (HTS) wires for use in advanced magnet technology and in energyapplications. Typical customers of the BioSpin segment include pharmaceuticaland biotechnology companies, academic institutions and government agencies.

 

Selected business segmentinformation for the three months ended March 31, 2008 and 2007 ispresented below (in thousands):

 
| ** **                            | ** ** | **Revenue** | ** ** | **Operating income (loss)** | ** ** |
|---------------------------------------|------------|-------------|------------|-----------------------------|------------|
| ** **                            | ** ** | **2008**    | ** ** | **2007**                    | ** ** | **2008** | ** ** | **2007** | ** ** |
| BioScience                            |       | $           | 142,629    |                        | $          | 112,753 |   | $ | 11,749 |   | $ | 8,943 |   |
| BioSpin                               |       | 112,118     |       | 107,647                     |       | 10,061 |   | 15,231 |   |
| Corporate, eliminations and other (a) |       | (16,311     | )          | (12,864                     | )          | (5,876 | ) | (4,465 | ) |
| Total                                 |       | $           | 238,436    |                        | $          | 207,536 |   | $ | 15,934 |   | $ | 19,709 |   |

----

(a)                      Represents revenue transactions betweensegments which are eliminated in consolidation and corporate costs notallocated to the reportable segements.

 

Total assets by segmentas of March 31, 2008 and December 31, 2007 are as follows (in thousands):

 

| ** **   | ** ** | **March 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|--------------|------------|--------------------|------------|-----------------------|------------|
| BioScience   |       | $                  | 688,231    |                  | $          | 584,902 |   |
| BioSpin      |       | 1,088,689          |       | 782,627               |       |
| Corporate    |       | 385,926            |       | 314,988               |       |
| Eliminations |       | (765,417           | )          | (370,886              | )          |
|         |       | $                  | 1,397,429  |                  | $          | 1,311,631 |   |

 

**19. Recent Accounting Pronouncements**

 

In December 2007,the FASB issued SFAS No. 141(R), *Business Combinations*(“SFAS No. 141(R)”). This statement will significantly change theaccounting for business combinations. Under SFAS No. 141(R), an acquiringentity will be required to recognize all of the assets acquired and liabilitiesassumed in a transaction at the acquisition date fair value with certainlimited exceptions. In addition, SFAS No. 141(R) will change theaccounting treatment for acquisition costs, in-process research anddevelopment, restructuring costs associated with business combinations andchanges in deferred tax asset valuation allowances and income tax uncertaintiesafter the acquisition date. SFAS No. 141(R) also includes asignificant number of new disclosure requirements. Early adoption of SFAS No. 141(R) isprohibited and the Company will be required to apply SFAS No. 141(R) toacquisitions that occur on or after January 1, 2009.

 

In December 2007,the FASB issued SFAS No. 160, *Noncontrolling Interestsin Consolidated Financial Statements — An Amendment of ARB No. 51*(“SFAS No. 160”). This statement establishes new accounting and reportingstandards for the minority interest in a subsidiary and the deconsolidation ofa subsidiary. SFAS No. 160 is effective as of the beginning of fiscal 2009and early adoption is prohibited. The Company has not yet assessed the effect,if any, that adoption of SFAS No. 160 will have on its results ofoperations and financial position.

 

In March 2008, the FASBissued SFAS No. 161, *Disclosures aboutDerivative Instruments and Hedging Activities*—*an amendmentof**FASB Statement No. 133* (“SFAS No.161”). SFAS No. 161 requires enhanced disclosures about an entity’s derivativeand hedging activities and, thereby, improves the transparency of financialreporting. SFAS No. 161 is effective for fiscal years beginning on or afterNovember 15, 2008. The Company is currently evaluating the impact that theadoption of SFAS No. 161 will have on its financial position, results ofoperations and cash flows.

 

16

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| **ITEM  2.** | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS** |
|--------------|-------------------------------------------------------------------------------------------------|

 

Thefollowing discussion of our financial condition and results of operationsshould be read in conjunction with our interim condensed consolidated financialstatements and the notes to those statements included in Part 1, Item 1 ofthis Quarterly Report on Form 10-Q, and in conjunction with theconsolidated financial statements contained in our Annual Report on Form 10-Kfor the year ended December 31, 2007.

 

Statementscontained in Management’s Discussion and Analysis of Financial Condition andResults of Operations which express that we “believe,” “anticipate,” “plan,” “expect,” “seek,” “estimate,”or “should,” as well as other statements which are not historical fact, areforward-looking statements within the meaning of the Private SecuritiesLitigation Act of 1995. Actual events or results may differ materially fromthose set forth in forward-looking statements. Certain factors that might causesuch a difference are discussed in “Factors Affecting Our Business, OperatingResults and Financial Condition” set forth in our Annual Report on Form 10-Kfor the year ended December 31, 2007.

 

**OVERVIEW**

 

The following Management’sDiscussion and Analysis of Financial Condition and Results of Operations, orMD&A, describes the principal factors affecting the results of ouroperations, financial condition and changes in financial condition, as well asour critical accounting policies and estimates. Our MD&A is organized asfollows:

 

·                                          *Executive overview.* This section provides a generaldescription and history of our business, a brief discussion of our reportablesegments, significant recent developments in our business and otheropportunities, challenges and risks that may impact our business in the future.

 

·                                          *Critical accounting policies.* This section discusses the accountingestimates that are considered important to our financial condition and resultsof operations and require us to exercise subjective or complex judgments intheir application.

 

·                                          *Results of operations.* This section provides our analysis ofthe significant line items on our consolidated statement of operations for thethree months ended March 31, 2008 compared to the three months ended March 31,2007.

 

·                                          *Liquidity and capital resources.* This section provides an analysis of ourliquidity and cash flow and a discussion of our outstanding debt andcommitments.

 

·                                          *Recent accounting pronouncements.* This section provides information aboutnew accounting standards that have been issued but for which adoption is notyet required.

 

**EXECUTIVE OVERVIEW**

 

*Business*

 

Bruker Corporation andits wholly-owned subsidiaries design, manufacture, market and serviceproprietary life science and materials research systems based on our coretechnology platforms, including X-ray technologies, magnetic resonancetechnologies, mass spectrometry technologies,optical emission spectroscopy and infrared and Raman molecular spectroscopytechnologies. We also manufacture and distribute a broad range of fieldanalytical systems for chemical, biological, radiological and nuclear, or CBRN,detection. We maintain major technical and manufacturing centers in Europe,North America and Japan and we have sales offices located throughout the world.Our corporate headquarters are located in Billerica, Massachusetts.

 

Our business strategy isto capitalize on our ability to innovate and generate rapid revenue growth,both organically and through acquisitions. Our revenue growth strategy,combined with anticipated improvements to our gross profit margins andincreased leverage on our research and development, sales and marketing anddistribution investments and general and administrative expenses, are expectedto enhance our operating margins and improve our earnings in the future.

 

 

17

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On February 26,2008, the Company completed its acquisition of Bruker BioSpin. Both the Companyand Bruker BioSpin were majority owned by six affiliated stockholders prior tothe acquisition. As a result, the acquisition of Bruker BioSpin by the Companyis considered a business combination of companies under common control, and hasbeen accounted for at historical carrying values. Historical consolidatedbalance sheets, statements of operations, statements of cash flows and notes tothe consolidated financial statements have been restated by combining thehistorical consolidated financial statements of Bruker Corporation with thoseof Bruker BioSpin. In addition, because the transaction is accounted for as anacquisition of businesses under common control, all one-time transaction costshave been expensed as incurred, rather than being added to goodwill.

 

With the addition ofBruker BioSpin, we enhanced our position as a leading supplier for life scienceand materials research. The technologies of Bruker BioSpin are particularlycomplementary to our accurate-mass electrospray time-of-flight massspectrometers and our single-crystal diffraction X-ray spectrometers and areexpected to create revenue synergies and provide opportunities to supplycustomers with equipment packages that have a broader range of applications andvalue. We believe the addition of Bruker BioSpin will also enhance ourdistribution in the Americas, Europe and Asia and our sales and serviceinfrastructure, all of which should provide us with revenue growthopportunities and accelerate our drive to improve our margins, net income andoperating cash flows.

 

Following the acquisitionof Bruker BioSpin, management reevaluated the way the Company is managed andthe internal reporting structure and, as a result of that evaluation, willreport its results based on the following reportable segments:

 

·                                          *BioScience*. The operations of this segment includethe design, manufacture and distribution of advanced instrumentation andautomated solutions based on X-ray technology, OES-spark technology, massspectrometry technology and infrared and Raman molecular spectroscopytechnology. Typical customers of the BioScience segment include pharmaceutical,biotechnology, proteomics and molecular diagnostic companies, academicinstitutions, government agencies, semiconductor companies, chemical, cement,metals and petroleum companies, raw material manufacturers and food, beverage andagricultural companies.

 

·                                          *BioSpin*. The operations of this segment includethe design, manufacture and distribution of enabling life science tools basedon its core technology, magnetic resonance, as well as the manufacturing anddevelopment of low temperature superconductor (LTS) and high temperaturesuperconductor (HTS) wires for use in advanced magnet technology and in energyapplications. Typical customers of the BioSpin segment include pharmaceuticaland biotechnology companies, academic institutions and government agencies.

 

*Financial Overview*

 

Forthe three months ended March 31, 2008, our revenue increased by $30.9million, or 14.9%, to $238.4 million, compared to $207.5 million for thecomparable period in 2007. Included in this change in revenue is approximately $20.6 million fromthe impact of foreign exchange. Excluding the effect of foreign exchange,revenue increased by $10.3 million, or5.0%. The increase in revenue excluding the effect of foreign exchangeis attributable primarily to higher salesin the BioScience segment, offset partially by lower sales from the BioSpinsegment.

 

Income fromoperations for the three months ended March 31,2008 was $15.9 million, resulting in an operating margin of 6.7%, compared to incomefrom operations of $19.7 million,resulting in an operating margin of 9.5%, for the comparable period of 2007.The decrease in income from operations resulted from higher operatingexpenses and $5.8 million of charges related to the acquisition of BrukerBioSpin offset partially by higher revenues and improved gross profit margins.The acquisition-related costs incurred in the first quarter of 2008 wereexpensed as incurred, rather than being added to goodwill, because theacquisition of Bruker BioSpin was accounted for as an acquisition of businessesunder common control.

 

 

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For the three monthsended March 31, 2008, the Company incurred pre-tax foreign exchange lossesof $12.2 million. These foreign exchange losses were driven primarily by the remeasurementof certain foreign currency denominated assets, principally cash, inter-companyreceivables and a short-term inter-company loan into the functional currency ofthe affected entities. The losses resulted from the continued weakening of theU.S. Dollar, as well as from an unexpected strengthening of the Swiss Francrelative to both the U.S. Dollar and the Euro by approximately 11% and 3%,respectively, during the five weeks between the closing of the Bruker BioSpinacquisition and the end of the first quarter of 2008.

 

We also incurredapproximately $1.4 million of interest expense on acquisition-related debtduring the period from February 26, 2008 to March 31, 2008. There wasno acquisition-related interest expense during the three months ended March 31,2007. In an effort to reduce interest expense in future periods, we repaidapproximately $55.0 million of this debt in April 2008 and an additional$90.0 million in May 2008. Additionally, in April 2008, we enteredinto an interest rate swap with an initial notional amount of $90.0 millionthat will hedge a portion of our $150.0 million variable-rate term loan and fixthe interest rate on the hedged portion of the debt at a rate of approximately3.8%.

 

Our net loss for the three months ended March 31,2008, was $(0.7) million, or $(0.00) per diluted share, compared to net incomeof $14.4 million, or $0.09 per dilutedshare, for the comparable period of 2007.

 

**CRITICAL ACCOUNTING POLICIES**

 

The discussion andanalysis of our financial condition and results of operations is based upon ourconsolidated financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States of America. Thepreparation of these financial statements requires that we make estimates andassumptions that affect the reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the financialstatements and reported amounts of revenues and expenses during the reportingperiod. On an ongoing basis, management evaluates its estimates and judgments,including those related to revenue recognition, allowance for doubtfulaccounts, inventories, goodwill, long-lived assets, warranty costs and incometaxes. We base our estimates and judgments on historical experience, currentmarket and economic conditions, industry trends and other assumptions that webelieve are reasonable and form the basis for making judgments about thecarrying value of assets and liabilities that are not readily apparent fromother sources. Actual results could differ from these estimates.

 

We believe the followingcritical accounting policies to be both those most important to the portrayalof our financial condition and those that require the most subjective judgment.

 

*Revenuerecognition.* Werecognize revenue from system sales when persuasive evidence of an arrangementexists, the price is fixed or determinable, title and risk of loss has beentransferred to the customer and collectibility of the resulting receivable isreasonably assured. Title and risk of loss is generally transferred to thecustomer upon receipt of a signed customer acceptance form for a system thathas been shipped, installed, and for which the customer has been trained. As aresult, the timing of customer acceptance or readiness could cause our reportedrevenues to differ materially from expectations. When products are sold throughan independent distributor or a strategic distribution partner, which assumesresponsibility for installation, we recognize the system sale when the producthas been shipped and title and risk of loss have been transferred. Ourdistributors do not have price protection rights or rights of return; however,our products are typically warranted to be free from defect for a period of oneto two-years. Revenue is deferred until cash is received when a significantportion of the fee is due over one year after delivery, installation andacceptance of a system. For arrangements with multiple elements, we recognizerevenue for each element based on the fair value of the element, provided allother criteria for revenue recognition have been met. The fair value for eachelement provided in multiple element arrangements is typically determined byreferencing historical pricing policies when the element is sold separately.Changes in our ability to establish the fair value for each element in multipleelement arrangements could affect the timing of revenue recognition. Revenuefrom accessories and parts is recognized upon shipment and service revenue isrecognized as the services are performed. Grant revenue is recognized when wecomplete the services required under the grant.

 

*Warrantycosts.* Wenormally provide a one to two-year parts and labor warranty with the purchaseof 

 

 

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equipment. Theanticipated cost for this warranty is accrued upon recognition of the sale andis included as a current liability on the balance sheet. Although ourfacilities undergo quality assurance and testing procedures throughout theproduction process, our warranty obligation is affected by product failurerates, material usage and service delivery costs incurred in correcting aproduct failure. Although our actual warranty costs have historically beenconsistent with expectations, to the extent warranty claim activity or costsassociated with servicing those claims differ from our estimates, revisions tothe warranty accrual may be required.

 

*Inventories.* Inventories are stated at the lower ofcost or market, with costs determined by the first-in, first-out method for amajority of subsidiaries and by average-cost for one international location. Wemaintain an allowance for excess and obsolete inventory to reflect the expectednon-saleable or non-refundable inventory based on an evaluation of slow movingproducts. If ultimate usage or demand varies significantly from expected usageor demand, additional write-downs may be required, resulting in a charge tooperations.

 

*Goodwill,other intangible assets and other long-lived assets.* We evaluate whether goodwill is impairedannually and when events occur or circumstances change that would more likelythan not reduce the fair value of a reporting unit below its carrying amount.Fair value is determined using market comparables for similar businesses orforecasts of discounted future cash flows. We also review other intangibleassets and other long-lived assets when indication of potential impairmentexists, such as a significant reduction in cash flows associated with theassets. Should the fair value of our long-lived assets decline because ofreduced operating performance, market declines, or other indicators ofimpairment, a charge to operations for impairment may be necessary.

 

*Allowancefor doubtful accounts.* We maintain allowances for doubtful accounts for estimated lossesresulting from the inability of our customers to pay amounts due. If thefinancial condition of our customers were to deteriorate, reducing theirability to make payments, additional allowances would be required, resulting ina charge to operations.

 

*Incometaxes.* Weestimate the degree to which tax assets and loss carryforwards will result in abenefit based on expected profitability by tax jurisdiction, and provide avaluation allowance for tax assets and loss carryforwards that we believe willmore likely than not go unused. If it becomes more likely than not that a taxasset or loss carryforward will be used for which a reserve has been provided,we reverse the related valuation allowance. If our actual future taxable incomeby tax jurisdiction differ from estimates, additional allowances or reversalsof reserves may be necessary.

 

**RESULTS OF OPERATIONS**

 

*Three Months Ended March 31,2008 Compared to the Three Months Ended March 31, 2007*

 

***ConsolidatedResults***

 

The following tablepresents our results for the three months ended March 31, 2008 and 2007(dollars in thousands):

 

 

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| ** **                                                                             | ** ** | **Three Months Ended  March 31,**    | ** ** |
|----------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                             | ** ** | **2008**                                  | ** ** | **2007** | ** ** |
| ** **                                                                             | ** ** | **(in thousands, except per share data)** | ** ** |
| Product revenue                                                                        |       | $                                         | 207,035    |   | $ | 181,609 |   |
| Service revenue                                                                        |       | 29,957                                    |       | 25,187 |   |
| Other revenue                                                                          |       | 1,444                                     |       | 740 |   |
| Total revenue                                                                          |       | 238,436                                   |       | 207,536 |   |
|                                                                                   |       |                                      |       |   |   |
| Cost of product revenue                                                                |       | 104,901                                   |       | 96,649 |   |
| Cost of service revenue                                                                |       | 20,406                                    |       | 16,339 |   |
| Total cost of  revenue                                                                 |       | 125,307                                   |       | 112,988 |   |
| Gross profit                                                                           |       | 113,129                                   |       | 94,548 |   |
|                                                                                   |       |                                      |       |   |   |
| Operating expenses:                                                                    |       |                                      |       |   |   |
| Sales and marketing                                                                    |       | 43,393                                    |       | 35,462 |   |
| General and administrative                                                             |       | 16,804                                    |       | 13,413 |   |
| Research and development                                                               |       | 31,205                                    |       | 25,964 |   |
| Acquisition related charges                                                            |       | 5,793                                     |       | — |   |
| Total operating  expenses                                                              |       | 97,195                                    |       | 74,839 |   |
| Operating income                                                                       |       | 15,934                                    |       | 19,709 |   |
|                                                                                   |       |                                      |       |   |   |
| Interest and other income (expense), net                                               |       | (12,189                                   | )          | 750 |   |
| Income before income tax provision and minority interest  in consolidated subsidiaries |       | 3,745                                     |       | 20,459 |   |
| Income tax provision                                                                   |       | 4,270                                     |       | 6,023 |   |
| Income (loss) before minority interest in  consolidated subsidiaries                   |       | (525                                      | )          | 14,436 |   |
| Minority interest in consolidated subsidiaries                                         |       | 160                                       |       | 86 |   |
| Net income (loss)                                                                      |       | $                                         | (685       | ) | $ | 14,350 |   |
| Net income (loss) per common share - basic and  diluted                                |       | $                                         | (0.00      | ) | $ | 0.09 |   |
| Weighted average common shares outstanding:                                            |       |                                      |       |   |   |
| Basic                                                                                  |       | 162,303                                   |       | 160,365 |   |
| Diluted                                                                                |       | 162,303                                   |       | 162,906 |   |

 

***Revenue***

 

Ourrevenue increased by $30.9 million, or 14.9%, to $238.4 million for the threemonths ended March 31, 2008, compared to $207.5 million for the comparableperiod in 2007. Included in this change in revenue is approximately $20.6million from the impact of foreign exchange. Excluding the effect of foreignexchange, revenue increased by 5.0%. The increase in revenue excluding theeffect of foreign exchange is attributable to an increase in revenues from theBioScience segment, principally from system revenues, offset partially by lowerrevenues from the BioSpin segment.

 

***Costof Revenue***

 

Ourcost of product and service revenue for the three months ended March 31,2008, was $125.3 million, resulting in a gross profit margin of 47.4%, comparedto cost of product and service revenue of $113.0 million, resulting in a grossprofit margin of 45.6% for the comparable period of 2007. The increase in grossprofit margin as a percentage of revenues is attributable primarily to productmix and improved utilization as a result of higher revenues and ongoinginitiatives targeted at improving gross margins. The increase in our grossprofit margin as a percentage of revenues was partially offset by the continuedweakening of the U.S. Dollar coupled with the fact that the majority of the ourmanufacturing is done in Europe.

 

 

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***Salesand Marketing***

 

Oursales and marketing expense for the three months ended March 31, 2008increased to $43.4 million, or 18.3% of product and service revenue, from $35.5million, or 17.1% of product and service revenue, for the comparable period of2007. The increase in sales and marketing expense is attributable to ourcontinuing investment in direct sales, inside sales product specialists andapplication resources. We also incurred higher commission expenses on higher revenuesgenerated through third-party distributors.

 

***Generaland Adminstrative***

 

Ourgeneral andadministrative expense for the threemonths ended March 31, 2008 increased to $16.8 million, or 7.1% of productand service revenue, from $13.4 million, or 6.5% of product and servicerevenue, for the comparable period of 2007. The increase is attributable toadditional headcount, primarily in the BioSpin segment, and was a necessarypart of Bruker BioSpin becoming a part of a publicly-traded company.

 

***Research and Development***

 

Ourresearch anddevelopment expense for the threemonths ended March 31, 2008 increased to $31.2 million, or 13.2% ofproduct and service revenue, from $26.0 million, or 12.6% of product andservice revenue, for the comparable period of 2007. The increase in researchand development expenses is attributable primarily to changes in foreigncurrency exchange rates, primarily the Euro, as a majority of our research anddevelopment is performed in Europe.

 

***Acquisition Related Charges***

 

On December 3, 2007,we announced that we had entered into a definitive agreement to acquire all ofthe stock of Bruker BioSpin. The acquisition of Bruker BioSpin was approved byour shareholders on February 25, 2008 and was completed on February 26,2008. The acquisition represented a business combination of companies undercommon control due to a majority of ownership of both Bruker Corporation andBruker BioSpin by the same individuals and, as a result, transaction costs areexpensed as incurred rather than being included in a purchase price allocation.During the three months ended March 31, 2008, the Company incurred andexpensed acquisition-related charges totaling $5.8 million, which consisted ofinvestment banking fees, legal fees and accounting fees. The Company does notexpect to incur any additional acquisition-related charges in connection withthe acquisition of Bruker BioSpin.

 

***Interest and Other Income (Expense), Net***

 

Interestand other income (expense), net during the three months ended March 31,2008, was $(12.2) million, compared to $0.8 million during the three monthsended March 31, 2007.

 

Duringthe three months ended March 31, 2008, the major component within interestand other income (expense), net, were losses on foreign currency transactionsof $12.2 million. Theseforeign exchange losses were driven primarily by the remeasurement of certainforeign currency denominated assets, principally cash, inter-companyreceivables and a short-term inter-company loan into the functional currency ofthe affected entities. The losses resulted from the continued weakening of theU.S. Dollar, as well as from an unexpected strengthening of the Swiss Francrelative to both the U.S. Dollar and the Euro by approximately 11% and 3%,respectively, during the five weeks between the closing of the Bruker BioSpinacquisition and the end of the first quarter of 2008.

 

Duringthe three months ended March 31, 2007, the major components withininterest and other income (expense), net, were net interest income of $1.2million offset partially by losses on foreign currency transactions of $0.7million. 

 

***Provision for Income Taxes***

 

Our effective tax ratereflects our tax provision for non-U.S. entities only, since no benefit was 

 

 

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recognized for lossesincurred in the U.S. We will maintain a full valuation allowance for our U.S.net operating losses until evidence exists that it is more likely than not thatthe loss carryforward amounts will be utilized to offset U.S. taxable income.Our tax rate may change over time as the amount and mix of income and taxesoutside the U.S. changes. The effective tax rate is calculated using ourprojected annual pre-tax income or loss and is affected by research anddevelopment tax credits, the expected level of other tax benefits, and theimpact of changes to the valuation allowance, as well as changes in the mix ofour pre-tax income and losses among jurisdictions with varying statutory taxrates and credits.

 

Theincome tax provision for the three months ended March 31, 2008, was $4.3million compared to an income tax provision of $6.0 million for the threemonths ended March 31, 2007, representing effective tax rates of 114.0%and 29.4%, respectively. The effective tax rate for the three months ended March 31,2008 is a result of the acquisition-related charges that did not result in anytax benefit and the foreign exchange losses that resulted in only modest taxbenefits. The acquisition costs did not generate tax benefits for us becausethey were incurred primarily in the U.S. and the foreign exchange losses didnot generate significant tax benefits because they occurred in foreignlocations with relatively low tax rates.

 

***Minority Interest in Consolidated Subsidiaries***

 

Minorityinterest in consolidated subsidiaries for the three months ended March 31,2008, was $0.2 million compared to $0.1 million for the comparable period of2007. The minority interest in subsidiaries represents the minorityshareholders’ proportionate share of net income of those subsidiaries for thethree months ended March 31, 2008 and 2007. The minority interest relatesto our two majority-owned indirect subsidiaries, InCoaTec GmbH and BrukerBaltic Ltd.

 

***Net Income (Loss)***

 

Our net income (loss) for the three months ended March 31,2008, was $(0.7) million, or $(0.00) per diluted share, compared to $14.4million, or $0.09 per diluted share, for the comparable period of 2007. Despitethe increase in revenue and improvement in gross margin described above, ournet income decreased as a result of higher operating expenses, including $5.8million of acquisition related charges, and foreign exchange losses during the threemonths ended March 31, 2008. 

 

***SegmentResults***

 

***Revenue***

 

The following tablepresents revenue, change in revenue and revenue growth by reportable segmentfor the three months ended March 31, 2008 and 2007 (dollars in thousands):

 
| ** **       | ** ** | **2008** | ** ** | **2007** | ** ** | **$ Change** | ** ** | **Percentage Change** | ** ** |
|------------------|------------|----------|------------|----------|------------|-------------------|------------|-----------------------|------------|
| BioScience       |       | $        | 142,629    |     | $          | 112,753           |       | $                     | 29,876     |   | 26.5 | % |
| BioSpin          |       | 112,118  |       | 107,647  |       | 4,471             |       | 4.2                   | %          |
| Eliminations (a) |       | (16,311  | )          | (12,864  | )          | (3,447            | )          |                  |       |
| Total Revenue    |       | $        | 238,436    |     | $          | 207,536           |       | $                     | 30,900     |   | 14.9 | % |

----

(a)                      Represents product and service revenuebetween reportable segments.

 

***BioScienceSegment Revenues***

 

BioSciencesegment revenue increased by $29.9 million, or 26.5%, to $142.6 million for thethree months ended March 31, 2008, compared to $112.8 million for thecomparable period in 2007. Included in this change in revenue is approximately$10.0 million from the impact of foreign exchange. Excluding the effect offoreign exchange, revenue increased by 17.6%. The increase in revenue excludingthe effect of foreign exchange is attributable to increases in system revenuesacross the various product lines. Revenues in the three months ended March 31,2007 include $1.5 million of molecular spectroscopy revenue that was recognizedfrom our order with the Chinese State Food and Drug Administration. The orderfrom the Chinese State Food and Drug Administration was completed during 2007and we did not recognize any 

 

 

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additionalsystem revenue from this order during the three months ended March 31,2008.

 

Systemrevenue, other system revenue and aftermarket revenue as a percentage of totalBioScience segment revenue were as follows during the three months ended March 31,2008 and 2007 (dollars in thousands):

 
|                 |   | **2008**    |       | **2007**                            |       |
|----------------------|--------|-------------|------------|-------------------------------------|------------|
|                 |   | **Revenue** | ** ** | **Percentage  of  Segment Revenue** | ** ** | **Revenue** | ** ** | **Percentage  of  Segment Revenue** |   |
| System Revenue       |   | $           | 104,074    |                                | 73.0       | % | $ | 80,818 |   | 71.7 | % |
| Other System Revenue |   | 9,492       |       | 6.7                                 | %          | 6,226 |   | 5.5 | % |
| Aftermarket Revenue  |   | 29,063      |       | 20.3                                | %          | 25,709 |   | 22.8 | % |
| Total Revenue        |   | $           | 142,629    |                                | 100.0      | % | $ | 112,753 |   | 100.0 | % |

 

Systemrevenues in the BioScience segment include X-ray systems, mass spectrometrysystems, CBRN detection systems and molecular spectroscopy systems. Othersystem revenues in the BioScience segment relate primarily to the distributionof products not manufactured by the BioScience segment. Aftermarket revenues inthe BioScience segment include accessory sales, consumables, training andservices.

 

***BioSpinSegment Revenues***

 

BioSpinsegment revenue increased by $4.5 million, or 4.2%, to $112.1 million for thethree months ended March 31, 2008, compared to $107.6 for the comparableperiod in 2007. Included in this change in revenue is approximately $10.6million from the impact of foreign exchange. Excluding the effect of foreignexchange, revenue decreased by 5.7%. The decrease in revenue excluding theeffect of foreign exchange is attributable to lower sales of high field analytical systems offset partially by higher aftermarket revenues.

 

Systemand wire revenue, other system revenue and aftermarket revenue as a percentageof total BioSpin segment revenue were as follows during the three months ended March 31,2008 and 2007 (dollars in thousands):

 
| ** **              | ** ** | **2008**    | ** ** | **2007**                           | ** ** |
|-------------------------|------------|-------------|------------|------------------------------------|------------|
| ** **              | ** ** | **Revenue** | ** ** | **Percentage of  Segment Revenue** | ** ** | **Revenue** | ** ** | **Percentage of  Segment Revenue** | ** ** |
| System and Wire Revenue |       | $           | 78,818     |                               | 70.3       | % | $ | 81,947 |   | 76.1 | % |
| Other System Revenue    |       | 5,000       |       | 4.5                                | %          | 1,900 |   | 1.8 | % |
| Aftermarket Revenue     |       | 28,300      |       | 25.2                               | %          | 23,800 |   | 22.1 | % |
| Total Revenue           |       | $           | 112,118    |                               | 100.0      | % | $ | 107,647 |   | 100.0 | % |

 

Systemand wire revenues in the BioSpin segment include Nuclear Magnetic Resonancesystems, Magnetic Resonance Imaging systems, Electron Paramagnetic Resonancesystems, Minispec systems, power supplies and our LTS and HTS wire business. Othersystem revenues in the BioSpin segment relate primarily to the distribution ofproducts not manufactured by Bruker BioSpin. Aftermarket revenues in theBioSpin segment include accessory sales, consumables, training and services.

 

***Income (Loss) from Operations***

 

The following tablepresents income (loss) from operations and operating margins on revenue byreportable segment for the three months ended March 31, 2008 and 2007 (dollarsin thousands):

 

 

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|                              |   | **2008**                     | ** ** | **2007**              |       |
|-----------------------------------|--------|------------------------------|------------|-----------------------|------------|
|                              |   | **Operating  Income (Loss)** | ** ** | **Operating  Margin** | ** ** | **Operating  Income (Loss)** | ** ** | **Operating  Margin** |   |
| BioScience                        |   | $                            | 11,749     |                  | 8.2        | % | $ | 8,943 |   | 7.9 | % |
| BioSpin                           |   | 10,061                       |       | 9.0                   | %          | 15,231 |   | 14.1 | % |
| Corporate, Eliminations and Other |   | (5,876                       | )          |                  |       | (4,465 | ) |   |   |
| Total Operating Income            |   | $                            | 15,934     |                  | 6.7        | % | $ | 19,709 |   | 9.5 | % |

 

BioSciencesegment income fromoperations for the three months ended March 31,2008, was $11.7 million, resulting in an operating margin of 8.2%, compared to incomefrom operations of $8.9 million,resulting in an operating margin of 7.9%, for the comparable period of 2007.The increase in operating margin is the result of higher revenues and improvedgross margins offset partially by higher operating expenses. The improvement ingross margins is attributable primarily to product mix and improved utilizationas a result of higher revenues and ongoing initiatives targeted at improvinggross margins. The increase in operating expenses related primarily to sellingand marketing and research and development costs. Selling and marketingexpenses increased as a result of our continuing investment in direct sales,inside sales product specialists and application resources. The increases in operatingexpenses, particularly  research anddevelopment, were impacted by changes in foreign currency exchange rates,primarily the Euro, as a majority of our research and development is performedin Europe.

 

BioSpinsegment income fromoperations for the three months ended March 31,2008, was $10.1 million, resulting in an operating margin of 9.0%, compared to incomefrom operations of $15.2 million,resulting in an operating margin of 14.1%, for the comparable period of 2007.The decrease in operating margin is the result of lower revenues combined withhigher operating expenses. The increase in operating expenses related primarilyto selling and marketing and general and administrative costs. Selling andmarketing expenses increased primarily from commission expenses that resultedfrom higher revenues generated through third-party distributors. The increasein general and administrative expenses is attributable to additional headcountand was a necessary part of Bruker BioSpin becoming a part of a publicly-tradedcompany.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

We currently anticipatethat our existing cash and credit facilities will be sufficient to support ouroperating and investing needs for at least the next twelve months, but thisdepends on our profitability and our ability to manage working capitalrequirements. Our future cash requirements will also be affected byacquisitions that we may consider. Historically, we have financed our growththrough a combination of debt financings and issuances of common stock. In thefuture, there can be no assurances that additional financing alternatives willbe available to us if required, or if available, will be obtained on termsfavorable to us.

 

During the three monthsended March 31, 2008, net cash provided by operating activities was $22.3million compared to net cash provided by operating activities of $21.5 millionduring the three months ended March 31, 2007. The change in cash fromoperating activities during the three months ended March 31, 2008 isattributable primarily to changes in working capital balances. The change in cashfrom operating activities during the three months ended March 31, 2007 isattributable to the results from operations and changes in working capitalbalances.

 

During the three months endedMarch 31, 2008, net cash used by investing activities was $440.6 million,compared to net cash used by investing activities of $7.1 million during thethree months ended March 31, 2007. Cash used by investing activitiesduring the three months ended March 31, 2008 was attributable primarily to$416.8 million used for acquisitions, primarily Bruker BioSpin, and $13.4million of capital expenditures. Cash used by investing activities during thethree months ended March 31, 2007 was attributable primarily to $4.3million in capital expenditures and $1.9 million for acquisitions, including$1.3 million in contingent consideration for acquisitions that occurred priorto 2007.

 

During the three monthsended March 31, 2008, net cash provided by financing activities was $355.9million, compared to net cash provided by financing activities of $5.6 millionduring the three months ended March 31, 2007. Cash provided by financingactivities during the three months ended March 31, 

 

 

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2008 was attributableprimarily to approximately $358.9 million of borrowings under long-term andshort-term debt arrangements. Cash provided by financing activities during thethree months ended March 31, 2007 was attributable primarily to $18.0million in net proceeds from the public offering of common stock offset partially by $12.4 million in netrepayments of long-term and short-term borrowings.

 

On February 26,2008, the Company completed its acquisition of Bruker BioSpin for $914.0million. The acquisition of Bruker BioSpin was financed with 57,544,872 sharesof unregistered common stock valued at $526.0 million based on the trailing 10day trading average closing price of $9.14 per share as of two days prior tothe signing of the transaction agreements, $351.0 million of cash obtainedunder new credit facilities and the balance with cash on hand. The CreditAgreement with a syndication of lenders provides for a revolving credit linewith a maximum commitment of $230.0 million and a term loan facility of $150.0million. The outstanding principal under the term loan is payable in quarterlyinstallments through December 2012. Borrowings under the Credit Agreementbear interest, at the Company’s option, at either (i) the higher of the primerate or the federal funds rate plus 0.50%, or (ii) adjusted LIBOR, plusmargins ranging from 0.40% to 1.25% and a facility fee ranging from 0.10% to0.20%. As of March 31, 2008, the weighted-average interest rate of borrowingsunder the Credit Agreement was approximately 4.1%.

 

Borrowings under theCredit Agreement are secured by the pledge to the banks of 100% of the capitalstock of each of the Company’s wholly-owned domestic subsidiaries and 65% ofthe capital stock of certain of the Company’s wholly-owned direct or indirectforeign subsidiaries. The Credit Agreement also requires the Company tomaintain certain financial ratios related to maximum leverage and minimuminterest coverage, as defined in the Credit Agreement. In addition to thefinancial ratios, the Credit Agreement restricts, among other things, theCompany’s ability to do the following: make certain payments; incur additionaldebt; incur certain liens; make certain investments, including derivativeagreements; merge, consolidate, sell or transfer all or substantially all ofthe Company’s assets; and enter into certain transactions with affiliates.

 

At March 31, 2008,we had outstanding debt totaling $422.5 million consisting of $369.0 millionoutstanding under the Credit Agreement, including $150.0 million drawn on aterm loan and $219.0 million under revolving loans, $26.7 million outstandingunder other long-term debt arrangements, $23.8 million outstanding under otherrevolving lines of credit and $3.0 million under capital lease obligations. Werepaid approximately $55.0 million of the outstanding revolving loans under theCredit Agreement in April 2008 and an additional $90.0 million ofrevolving loans in May 2008. At December 31, 2007, we had outstandingdebt totaling $44.2 million consisting of $28.0 million outstanding under otherlong-term debt arrangements, $13.2 million outstanding under other revolvinglines of credit and $3.0 million under capital lease obligations.

 

Amounts outstanding underother long-term debt arrangements include both collateralized anduncollateralized arrangements with various financial institutions in Germany,Japan and a government agency in the United States. These debt arrangementsconsist of fixed and variable interest rates ranging from 1.8% to 8.0% at March 31,2008. In connection with certain of these agreements we are required tomaintain certain financial ratios as defined in the agreements. At March 31,2008, we were not in compliance with one of the covenants required by ourarrangement with the government agency in the United States. The failure tomeet this covenant did not trigger any cross-default provisions in otherborrowing arrangements, including the Credit Agreement. On May 8, 2008, wereceived a limited waiver from the holder of the debt for the quarterly periodended March 31, 2008.

 

Amounts outstanding underother revolving lines of credit are with various financial institutions inGermany, Japan and France and have aggregate maximum borrowing amounts ofapproximately $84.6 million at March 31, 2008. With consideration tooutstanding letters of credit, we had availability of approximately $50.1million under other revolving lines of credit at March 31, 2008. Ourrevolving lines of credit are generally uncollateralized and bear interest at variablerates ranging from 1.5% to 9.8% at March 31, 2008. Effective February 26,2008, we terminated a $75.0 million line of credit in the United States andreplaced it with the revolving credit available under the Credit Agreement.

 

The following table summarizesmaturities for our significant financial obligations as of March 31, 2008(in thousands):

 

 

26

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| **Contractual Obligations**                | ** ** | **Total** | ** ** | **Less than  1 year** | ** ** | **1-3  Years** | ** ** | **4-5  Years** | ** ** | **More than  5 years** | ** ** |
|--------------------------------------------|------------|-----------|------------|-----------------------|------------|----------------|------------|----------------|------------|------------------------|------------|
| Short-term borrowings                      |       | $         | 23,831     |                  | $          | 23,831         |       | $              | —     |                   | $          | — |   | $ | — |   |
| Long-term debt,  including current portion |       | 395,691   |       | 228,455               |       | 59,780         |       | 107,176        |       | 280                    |       |
| Capital lease  obligations                 |       | 3,002     |       | 810                   |       | 1,194          |       | 597            |       | 401                    |       |
| Uncertain tax contingencies                |       | 18,941    |       | —                |       | 18,941         |       | —         |       | —                 |       |
| Total contractual obligations              |       | $         | 441,465    |                  | $          | 253,096        |       | $              | 79,915     |                   | $          | 107,773 |   | $ | 681 |   |

 

As of March 31,2008, we have approximately $21.4 million of net operating loss carryforwardsavailable to reduce future U.S. taxable income. These losses have variousexpiration dates through 2027. The Company also has U.S. tax credits ofapproximately $11.1 million available to offset future tax liabilities thatexpire at various dates. These credits include foreign tax credits of $8.0million expiring in various years through 2017 and research anddevelopment tax credits of $3.1 million expiring through 2025. These operatinglosses and tax credit carryforwards may be subject to limitations underprovisions of the Internal Revenue Code.

 

Uncertain taxcontingencies are positions taken or expected to be taken on an income taxreturn that may result in additional payments to tax authorities. The amount inthe preceding table includes interest and penalties accrued related to thesepositions as of March 31, 2008. The total amount of uncertain taxcontingencies is included in the “1-3 Years” column as the Company is not ableto reasonably estimate the timing of potential future payments. If a taxauthority agrees with the tax position taken or expected to be taken or theapplicable statute of limitations expires, then additional payments will not benecessary.

 

**NEW ACCOUNTING PRONOUNCEMENTS**

 

In December 2007,the FASB issued SFAS No. 141(R), *Business Combinations*(“SFAS No. 141(R)”). This statement will significantly change theaccounting for business combinations. Under SFAS No. 141(R), an acquiringentity will be required to recognize all of the assets acquired and liabilitiesassumed in a transaction at the acquisition date fair value with certainlimited exceptions. In addition, SFAS No. 141(R) will change theaccounting treatment for acquisition costs, in-process research anddevelopment, restructuring costs associated with business combinations andchanges in deferred tax asset valuation allowances and income tax uncertaintiesafter the acquisition date. SFAS No. 141(R) also includes asignificant number of new disclosure requirements. Early adoption of SFAS No. 141(R) isprohibited and the Company will be required to apply SFAS No. 141(R) toacquisitions that occur on or after January 1, 2009.

 

In December 2007,the FASB issued SFAS No. 160, *Noncontrolling Interestsin Consolidated Financial Statements — An Amendment of ARB No. 51*(“SFAS No. 160”). This statement establishes new accounting and reportingstandards for the minority interest in a subsidiary and the deconsolidation ofa subsidiary. SFAS No. 160 is effective as of the beginning of fiscal 2009and early adoption is prohibited. The Company has not yet assessed the effect,if any, that adoption of SFAS No. 160 will have on its results ofoperations and financial position.

 

In March 2008, the FASBissued SFAS No. 161, *Disclosures aboutDerivative Instruments and Hedging Activities*—*an amendmentof**FASB Statement No. 133* (“SFAS No.161”). SFAS No. 161 requires enhanced disclosures about an entity’s derivativeand hedging activities and, thereby, improves the transparency of financialreporting. SFAS No. 161 is effective for fiscal years beginning on or afterNovember 15, 2008. The Company is currently evaluating the impact that theadoption of SFAS No. 161 will have on its financial position, results ofoperations and cash flows.

 
| **ITEM  3.** | **QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET  RISK** |
|--------------|-----------------------------------------------------------------|

 

We are potentiallyexposed to market risks associated with changes in foreign exchange rates andinterest rates. We selectively use financial instruments to reduce these risks.All transactions related to risk management techniques are authorized andexecuted pursuant to our policies and procedures. Analytical techniques used tomanage and monitor foreign exchange and interest rate risk include marketvaluations and sensitivity analysis.

 

***Impact of Foreign Currencies***

 

The Company generates asubstantial portion of its revenues in international markets, principallyEurope and Japan, which subjects its operations to the exposure of exchangerate fluctuations. The impact of currency exchange rate movement can bepositive or negative in any period. Our costs related to sales in foreigncurrencies are largely denominated in the same respective currencies, limitingour transaction risk exposure. However, for sales not denominated in U.S. Dollars,if there is an increase in the rate at which a 

 

 

27

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foreign currency isexchanged for U.S. Dollars, it will require more of the foreign currency toequal a specified amount of U.S. Dollars than before the rate increase. In suchcases, if we price our products in the foreign currency, we will receive lessin U.S. Dollars than we did before the rate increase went into effect. If weprice our products in U.S. Dollars and competitors price their products inlocal currency, an increase in the relative strength of the U.S. Dollar couldresult in our prices not being competitive in a market where business istransacted in the local currency.

 

Our foreign exchangelosses, net were $12.2 million and $0.7 million for the three monthsended March 31, 2008 and 2007, respectively. As we continue to expandinternationally we will continue to evaluate our currency risks and may utilizeforeign exchange contracts more frequently in order to mitigate our foreigncurrency exposures. From time to time, we have entered into foreign currencycontracts in order to minimize the volatility that fluctuations in exchangerates will have on the Company’s cash flows related to purchases and salesdenominated in foreign currencies. At March 31, 2008, there were nooutstanding forward currency contracts.

 

***Impact of Interest Rates***

 

We regularly investexcess cash in overnight repurchase agreements and interest-bearinginvestment-grade securities that we hold for the duration of the term of therespective instrument and that are subject to changes in short-term interestrates. We believe that the market risk arising from holding these financialinstruments is minimal.

 

Our exposure related toadverse movements in interest rates is derived primarily from outstandingfloating rate debt instruments that are indexed to short-term market rates. Ourobjective in managing our exposure to interest rates is to decrease thevolatility that changes in interest rates might have on our earnings and cashflows. To achieve this objective we entered into interest rate swaps and crosscurrency rate swaps in order to minimize the volatility that changes ininterest rates might have on earnings and cash flows.

 

In April 2008, weentered into an interest rate swap arrangement to pay a fixed rate ofapproximately 3.8% and receive a variable rate based on three month LIBORthrough December 31, 2012. The initial notional amount of this interestrate swap is $90.0 million and will amortize in proportion to the term debtcomponent of the Credit Agreement. We have determined that this swap is aneffective hedge of the variability of cash flows of the interest paymentsunder SFAS No. 133, *Accounting for Derivative Instruments and Hedging Activities*(“SFASNo. 133”).

 

In addition, in 2002 weentered into a cross currency interest rate swap arrangement under which theCompany receives semiannual interest payments in Euros based on a variableinterest rate equal to the six-month EURIBOR rate in exchange for semiannualpayments in Swiss francs at a fixed rate of 4.97% through December 2011.The notional amount of this interest rate swap arrangement was €5.0 million at March 31,2008. In 1999, the Company entered into an interest rate swap arrangement topay a 4.60% fixed rate of interest and receive a variable rate of interestbased on the Securities Industry and Financial Markets Municipal Swap Indexthrough December 2013. The notional amount of this interest rate swaparrangement was $1.5 million at March 31, 2008. We have determined thatthese swaps are not effective in offsetting the change in interest cash flowsbeing hedged as defined by SFAS No. 133.

 

A 10% increase ordecrease in the average cost of our variable rate debt would not result in amaterial change in pre-tax interest expense.

 

***Inflation***

 

We do not believeinflation had a material impact on our business or operating results during anyof the periods presented.

 
| **ITEM  4.** | **CONTROLS AND PROCEDURES** |
|--------------|-----------------------------|

 

We have establisheddisclosure controls and procedures that are designed to ensure that materialinformation relating to us, including our consolidated subsidiaries, is madeknown to our Chief Executive Officer (principal executive officer) and ChiefFinancial Officer (principal financial officer) by others 

 

 

28

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within our organization.Under the supervision and with the participation of our management, includingour Chief Executive Officer and Chief Financial Officer, we conducted anevaluation of the effectiveness of our disclosure controls and procedures as ofMarch 31, 2008. Based on this evaluation, our Chief Executive Officer andChief Financial Officer concluded that our disclosure controls and procedureswere effective as of March 31, 2008, to ensure that the informationrequired to be disclosed by us in the reports that we file or submit under theSecurities Exchange Act of 1934 is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and forms.

 

There were no changes inour internal control over financial reporting that occurred during the quarterended March 31, 2008 that materially affected, or are reasonably likely toaffect, our internal control over financial reporting.

 

 

29

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| **PART II** | **OTHER  INFORMATION** |
|------------------|------------------------|

 
| **ITEM  1.** | **LEGAL PROCEEDINGS** |
|--------------|-----------------------|

 

Except as set forthbelow, there have been no material changes to the legal proceedings disclosedin Part I, “Item 3. Legal Proceedings” in our Annual Report on Form 10-Kfor the year ended December 31, 2007.

 

Our subsidiary BrukerDaltonics is party to an Agreement with Isis Pharmaceuticals, Inc. regardingthe manufacture and sale of certain systems sold by Isis which incorporate massspectrometers from Bruker Daltonics.  Theparties are currently in a dispute regarding the performance of each partyunder the Agreement.  Pursuant to theAgreement’s dispute resolution mechanism, the parties have scheduled amediation with a third party mediator during May 2008 in an attempt to resolvethe disputes.  If the mediation does notresolve the dispute, it is possible litigation between the parties will follow.

 
| **ITEM  1A.** | **RISK FACTORS** |
|---------------|------------------|

 

Inaddition to the other information set forth in this report, you shouldcarefully consider the factors discussed in Part I, “Item 1A. Risk Factors”in our Annual Report on Form 10-K for the year ended December 31,2007, which could materially affect our business, financial condition or futureresults. The risks described in this report and in our Annual Report on Form 10-Kare not the only risks facing our Company. Additional risks and uncertaintiesnot currently known to us or that we currently deem to be immaterial also maymaterially adversely affect our business, financial condition and/or operatingresults.

 

Exceptas set forth below, there have been no material changes to the risk factorsdisclosed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-Kfor the fiscal year ended December 31, 2007.

 

***Ourreported financial results may be adversely affected by fluctuations incurrency exchange rates.***

 

Our exposure to currency exchange rate fluctuationsresults primarily from the currency translation exposure associated with thepreparation of our consolidated financial statements and from the transactionexposure associated with transactions of our subsidiaries that are denominatedin a currency other than the respective subsidiary’s functional currency. Whileour financial results are reported in U.S. Dollars, the financial statements ofmany of our subsidiaries outside the United States are prepared using the localcurrency as the functional currency. During consolidation, these results aretranslated into U.S. Dollars by applying appropriate exchange rates. As aresult, fluctuations in the exchange rate of the U.S. Dollar relative to thelocal currencies in which our foreign subsidiaries report therefore could causesignificant fluctuations in our reported results. Moreover, as exchange ratesvary, revenue and other operating results may differ materially from ourexpectations. 

 

Additionally, to the extent monetary assets andliabilities, including debt, are held in a different currency than thereporting subsidiary’s functional currency, fluctuations in currency exchangerates may have a significant impact on our reported financial results, and maylead to increased earnings volatility. We may record significant gains orlosses related to both the translation of cash and cash equivalents held by oursubsidiaries into local currencies and the revaluation of inter-companyreceivables and loan balances. 

 
| **ITEM  2.** | **UNREGISTERED SALES OF EQUITY SECURITIES AND USE  OF PROCEEDS** |
|--------------|------------------------------------------------------------------|

 

Except as reported inItem 3.02 of the Company’s Current Report on Form 8-K dated February 21,2008 filed with the Commission on February 27, 2008, there were nounregistered sales of equity securities during the three months ended March 31,2008.

 
| **ITEM  3.** | **DEFAULTS UPON SENIOR SECURITIES** |
|--------------|-------------------------------------|

 

None.

 
| **ITEM  4.** | **SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERS** |
|--------------|----------------------------------------------------------|

 
| (a)    |   | A special meeting of stockholders of the  Company was held on February 25, 2008.                                                                                                                                      |   |       |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|
|   |   |                                                                                                                                                                                                                       |   |       |
| (c)    |   | Proxies representing 97,645,412 shares were  received. Total shares outstanding as of the record date were 105,670,237.  The matters voted upon and the results of the voting at the Special Meeting  are set forth below: |   |       |
|   |   |                                                                                                                                                                                                                       |   |       |
| (i)    |   | To approve the  acquisition of all of the outstanding stock of Bruker BioSpin Inc.:                                                                                                                                   |   |       |
|   |   |                                                                                                                                                                                                                       |   |       |
|   |   |                 Vote  of the stockholders of the Company who are unaffiliated with the Laukien  stockholders:                                   |   |       |
|   |   |                                                                                                                                                                                                                       |   |       |
|   |   |                                 Votes  for                      |   | 39,941,066 |
|   |   |                                 Votes  against                  |   | 47,639     |
|   |   |                                 Votes  abstaining               |   | 24,853     |
|   |   |                                 Broker  non-votes               |   | 2,609,696  |
|   |   |                                                                                                                                                                                                                       |   |       |
|   |   |                 Vote  of all of the stockholders:                                                                                               |   |       |
|   |   |                                                                                                                                                                                                                       |   |       |
|   |   |                                 Votes  for                      |   | 94,963,224 |
|   |   |                                 Votes  against                  |   | 47,639     |
|   |   |                                 Votes  abstaining               |   | 24,853     |
|   |   |                                                                                                                                                                                                                       |   |       |
| (ii)   |   | To approve the acquisition of all of the outstanding share capital  of Bruker Physik GmbH and Techneon AG:                                                                                                                 |   |       |
|   |   |                                                                                                                                                                                                                       |   |       |
|   |   |                 Vote  of the stockholders of the Company who are unaffiliated with the Laukien  stockholders:                                   |   |       |
|   |   |                                                                                                                                                                                                                       |   |       |
|   |   |                                 Votes  for                      |   | 39,943,956 |

 

 

30

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|   |   |                                 Votes  against                                                         |   | 64,424     |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|
|   |   |                                 Votes  abstaining                                                      |   | 5,178      |
|   |   |                                 Broker  non-votes                                                      |   | 2,609,696  |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   |                 Vote  of all of the stockholders:                                                                                                                                      |   |       |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   |                                 Votes  for                                                             |   | 94,966,114 |
|   |   |                                 Votes  against                                                         |   | 64,424     |
|   |   |                                 Votes  abstaining                                                      |   | 5,178      |
|   |   |                                                                                                                                                                                                                                                              |   |       |
| (iii)  |   | To approve the acquisition through reverse  triangular merger of all of the outstanding share capital of Bruker BioSpin  Invest AG and the issuance of shares of the Company’s common stock in  connection with the acquisition of Bruker BioSpin Invest AG: |   |       |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   |                 Vote  of the stockholders of the Company who are unaffiliated with the Laukien  stockholders:                                                                          |   |       |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   |                                 Votes  for                                                             |   | 39,940,656 |
|   |   |                                 Votes  against                                                         |   | 65,874     |
|   |   |                                 Votes  abstaining                                                      |   | 7,028      |
|   |   |                                 Broker  non-votes                                                      |   | 2,609,696  |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   |                 Vote  of all of the stockholders:                                                                                                                                      |   |       |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   |                                 Votes  for                                                             |   | 94,962,814 |
|   |   |                                 Votes  against                                                         |   | 65,874     |
|   |   |                                 Votes  abstaining                                                      |   | 7,028      |
|   |   |                                                                                                                                                                                                                                                              |   |       |
| (iv)   |   | To approve the amendment of the Company’s certificate of  incorporation to increase the number of shares of common stock authorized for  issuance from 200,000,000 to 260,000,000:                                                                           |   |       |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   |                                 Votes  for                                                             |   | 97,292,205 |
|   |   |                                 Votes  against                                                         |   | 161,610    |
|   |   |                                 Votes  abstaining                                                      |   | 191,597    |
|   |   |                                                                                                                                                                                                                                                              |   |       |
| (v)    |   | To approve the amendment of the Company’s amended and restated  stock option plan to increase the number of shares of common stock for which  options and restricted stock may be granted under the plan from 8,000,000 to  10,000,000:                      |   |       |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   |                                 Votes  for                                                             |   | 88,652,676 |
|   |   |                                 Votes  against                                                         |   | 6,355,696  |
|   |   |                                 Votes  abstaining                                                      |   | 27,344     |
|   |   |                                 Broker  non-votes                                                      |   | 2,609,696  |
|   |   |                                                                                                                                                                                                                                                              |   |       |
| (vi)   |   | To approve the amendment of the Company’s  certificate of incorporation to change the name from Bruker BioSciences Corporation  to Bruker Corporation:                                                                                                       |   |       |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   |                                 Votes  for                                                             |   | 97,541,708 |
|   |   |                                 Votes  against                                                         |   | 77,399     |
|   |   |                                 Votes  abstaining                                                      |   | 26,305     |
|   |   |                                                                                                                                                                                                                                                              |   |       |
| (vii)  |   | To elect Dirk D. Laukien, Ph.D. as a  Class II director to hold office until the 2008 Annual Meeting, and to  elect Tony W. Keller, Ph.D. as a Class III director to hold office until  the 2009 Annual Meeting:                                        |   |       |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   | (i)            Dirk  D. Laukien, Ph.D. as Class II director                                                                                                                                           |   |       |
|   |   |                                 Votes  for                                                             |   | 83,150,604 |
|   |   |                                 Votes  withheld                                                        |   | 14,494,808 |
|   |   |                                                                                                                                                                                                                                                              |   |       |
|   |   | (ii)           Tony  W. Keller, Ph.D. as Class III director                                                                                                                                                |   |       |
|   |   |                                 Votes  for                                                             |   | 83,154,501 |
|   |   |                                 Votes  withheld                                                        |   | 14,490,911 |

 

Except as set forth above, there were no sharesabstaining and no broker non-voting shares cast.

 

31

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| **ITEM  5.** | **OTHER INFORMATION** |
|--------------|-----------------------|

 

None.

 
| **ITEM  6.** | **EXHIBITS** |
|--------------|--------------|

** **
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                               |
|----------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                 |       | Certification by Chief Executive Officer pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 (1)                                                                                  |
| 31.2                 |       | Certification by Chief Financial Officer pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 (1)                                                                                  |
| 32.1                 |       | Certification by Chief Executive Officer and Chief Financial Officer  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 (2) |

----

(1)                      Filed herewith.

 

(2)                      Furnished herewith.

 

 

32

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 

|                    |   | BRUKER CORPORATION |                                                                                                      |
|-------------------------|--------|--------------------|-----------------------------------------------------------------------------------------------------------|
|                    |   |               |                                                                                                      |   |
| Date: May 12, 2008 |   | By:                | /s/  FRANK  H. LAUKIEN, PH.D.                                                                   |   |
|                    |   | * *           | Frank H. Laukien, Ph.D*.**President, Chief Executive Officer and Chairman**(Principal Executive Officer)* | * * |

 

 

| Date: May 12, 2008 |   | By:      | /s/  WILLIAM  J. KNIGHT                                                         |     |
|-------------------------|--------|----------|-------------------------------------------------------------------------------------------|----------|
|                    |   | * * | William J.  Knight*Chief Financial Officer  (Principal Financial and Accounting Officer)* | * * |

 

 

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